##### Table of Contents

---



SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



---



FORM 20-F



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------



OR



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------



| | For the fiscal year ended December 31, 2003
| | -------------------------------------------



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



Commission File Number: 1-14522



---



OPEN JOINT STOCK COMPANY

VIMPEL-COMMUNICATIONS

(Exact name of registrant as specified in its charter)



Russian Federation

(Jurisdiction of incorporation or organization)



10 Ulitsa 8 Marta, Building 14, Moscow, Russian
Federation 127083

(Address of principal executive offices)



Securities registered or to be registered pursuant to Section 12(b) of the Act:



---



|                                                                                                   |  |                                          
|-------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|Title of Each Class                                                                                |  | Name of Each Exchange on Which Registered
|American Depositary Shares, or ADSs, each representing three-quarters of one share of common stock |  | New York Stock Exchange                  
|                                                                                                   | 
|Common stock, 0.005 rubles nominal value                                                           |  | New York Stock Exchange*                 

---

|* | Listed, not for trading or quotation purposes, but only in connection with the registration of ADSs pursuant to the requirements of the Securities and Exchange Commission.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Securities registered or to be registered
pursuant to Section 12(g) of the Act:



None



Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act:



None



Indicate the number of outstanding shares of each of
the issuers classes of capital or common stock as of the close of the period covered by the annual report:



40,332,201 shares of common stock, 0.005 rubles nominal value.



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark which financial statement item the registrant has
elected to follow. Item 17 ̈Item 18  x



---



---

##### Table of Contents

TABLE OF CONTENTS



|           |  |                                                                              |  |    
|---------- |  | ---------------------------------------------------------------------------- |  | ---
|PART I     |  | 6                                                                           
|           |  |                                                                             
|ITEM 1.*   |  | Identity of Directors, Senior Management and Advisers                        |  | 6  
|ITEM 2.*   |  | Offer Statistics and Expected Timetable                                      |  | 6  
|ITEM 3.    |  | Key Information                                                              |  | 6  
|ITEM 4.    |  | Information on the Company                                                   |  | 43 
|ITEM 5.    |  | Operating and Financial Review and Prospects                                 |  | 79 
|ITEM 6.    |  | Directors, Senior Management and Employees                                   |  | 112
|ITEM 7.    |  | Major Shareholders and Related Party Transactions                            |  | 120
|ITEM 8.    |  | Financial Information                                                        |  | 125
|ITEM 9.    |  | The Offer and Listing                                                        |  | 126
|ITEM 10.   |  | Additional Information                                                       |  | 127
|ITEM 11.   |  | Quantitative and Qualitative Disclosures About Market Risk                   |  | 147
|ITEM 12.*  |  | Description of Securities other than Equity Securities                       |  | 149
|           | 
|PART II    |  | 150                                                                         
|           |  |                                                                             
|ITEM 13.*  |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 150
|ITEM 14.*  |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 150
|ITEM 15.   |  | Controls and Procedures                                                      |  | 150
|ITEM 16A.  |  | Audit Committee Financial Expert                                             |  | 150
|ITEM 16B.  |  | Code of Ethics                                                               |  | 150
|ITEM 16C.  |  | Principal Accountant Fees and Services                                       |  | 151
|ITEM 16D.* |  | Exemptions from the Listing Standards for Audit Committees                   |  | 151
|ITEM 16E.* |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       |  | 151
|           | 
|PART III   |  | 152                                                                         
|           |  |                                                                             
|ITEM 17.** |  | Financial Statements                                                         |  | 152
|ITEM 18.   |  | Financial Statements                                                         |  | 152
|ITEM 19.   |  | Exhibits                                                                     |  | 152

---

|* | Omitted because the item is inapplicable.
|- | -----------------------------------------

|** | We have responded to Item 18 in lieu of this item.
|-- | --------------------------------------------------



2



---

##### Table of Contents

EXPLANATORY NOTE



This Annual Report on Form 20-F describes matters that relate generally to Open Joint Stock Company
Vimpel-Communications, also referred to as VimpelCom, an open joint stock company organized under the laws of the Russian Federation, and its consolidated subsidiaries. Thus, we use terms such as we, us,
our and similar plural pronouns when describing the matters that relate generally to the VimpelCom consolidated group.



This Annual Report on Form 20-F describes matters that relate to our operations in the City of Moscow and the surrounding Moscow Region and we use the
term Moscow license area to describe this area. This Annual Report on Form 20-F also describes matters that relate to our operations in the regions of the Russian Federation outside of the city of Moscow and the surrounding Moscow
region. Thus, we use terms such as the regions, the regions outside of Moscow and the regions outside of the Moscow license area and similar expressions when describing matters that relate to our operations in the
regions of the Russian Federation outside of the City of Moscow and the surrounding Moscow region.



For the purposes of this Annual Report on Form 20-F, the term super-region includes Russias seven large geographical regions as well as
the Moscow license area.



In addition, the discussion of our
business and the wireless telecommunications industry contains references to numerous technical and industry terms, specifically:



| |  | References to GSM-900/1800 are to dual band networks that provide wireless mobile telephone services using the Global System for Mobile Communications standard in the
900 MHz and 1800 MHz frequency ranges. References to GSM-1800 are to networks that provide wireless mobile telephone services using GSM in the 1800 MHz frequency range. References to GSM-900 are to networks that provide
wireless mobile telephone services using GSM in the 900MHz frequency range. References to GSM are to both the GSM-900 and GSM-1800 standards.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | References to AMPS are to both analog and digital versions of the Advanced Mobile Phone System cellular standard in the 800 MHz frequency range, and references to
D-AMPS are to the digital version of AMPS.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | References to spectrum allocated are to one half of the total allocated spectrum, because two equal frequency bands are allocated to permit transmission by base stations and
subscriber mobile telephone units.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Certain
amounts and percentages that appear in this Annual Report on Form 20-F have been subject to rounding adjustments.



3



---

##### Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



This Annual Report on Form 20-F contains forward-looking
statements, as this phrase is defined in Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking
statements are not historical facts and can often be identified by the use of terms like estimates, projects, anticipates, expects, intends, believes, will,
may, should or the negative of these terms. All forward-looking statements, including discussions of strategy, plans, objectives, goals and future events or performance, involve risks and uncertainties. Examples of
forward-looking statements include:



| |  | our plans to expand or build networks, notably, in the regions of Russia outside of Moscow;
| | - | -------------------------------------------------------------------------------------------



| |  | our anticipated capital expenditures in Moscow and in the regions of Russia outside of Moscow;
| | - | ----------------------------------------------------------------------------------------------



| |  | our ability to resolve issues raised by our regulator regarding our Moscow operations;
| | - | --------------------------------------------------------------------------------------



| |  | our ability to merge with our subsidiaries Open Joint Stock Company VimpelCom-Region, which we refer to in this Annual Report on Form 20-F as VimpelCom-Region, and Open
Joint Stock Company KB Impuls, which we refer to in this Annual Report on Form 20-F as KB Impuls, or transfer our licenses, frequencies and other permissions held by VimpelCom-Region or KB Impuls to VimpelCom if these mergers are
consummated;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our plans to increase our subscriber base;
| | - | ------------------------------------------



| |  | expectations as to pricing for our products and services in the future and our future operating results;
| | - | --------------------------------------------------------------------------------------------------------



| |  | our ability to meet license requirements and to obtain and maintain licenses, frequency allocations and regulatory approvals;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| |  | our plans to further develop and commercialize value added services and wireless Internet services;
| | - | ---------------------------------------------------------------------------------------------------



| |  | our expectations regarding our brand name recognition and our ability to successfully promote our brand;
| | - | --------------------------------------------------------------------------------------------------------



| |  | expectations as to the future of the telecommunications industry and the regulation of the telecommunications industry; and
| | - | ---------------------------------------------------------------------------------------------------------------------------



| |  | other statements regarding matters that are not historical facts.
| | - | -----------------------------------------------------------------



While these statements are based on sources believed to be reliable and on our managements current knowledge and best belief, they are merely
estimates or predictions and cannot be relied upon. We cannot assure you that future results will be achieved. The risks and uncertainties that may cause our actual results to differ materially from the results indicated, expressed or implied in the
forward-looking statements used in this Annual Report on Form 20-F and the documents incorporated by reference include:



| |  | risks relating to changes in political, economic and social conditions in Russia;
| | - | ---------------------------------------------------------------------------------



| |  | risks relating to Russian legislation, regulation and taxation, including laws, regulations, decrees and decisions governing the Russian telecommunications industry and currency and
exchange controls relating to Russian entities and their official interpretation by governmental and other regulatory bodies and by Russian courts;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | risks relating to our company, including demand for and market acceptance of our products and services, regulatory uncertainty regarding our licenses and frequency allocations,
constraints on our spectrum capacity, availability of line capacity and competitive product and pricing pressures; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | other risks and uncertainties.
| | - | ------------------------------



4



---

##### Table of Contents

These factors and the other risk factors described in this Annual Report on Form 20-F and in the
documents incorporated by reference are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also
could harm our future results. Under no circumstances should the inclusion of such forward-looking statements in this Annual Report on Form 20-F be regarded as a representation or warranty by us or any other person with respect to the achievement of
results set out in such statements or that the underlying assumptions used will in fact be the case. The forward-looking statements included in this Annual Report on Form 20-F are made only as of the date of this Annual Report on Form 20-F and we
cannot assure you that projected results or events will be achieved. Except to the extent required by law, we disclaim any obligation to update or revise any of these forward-looking statements, whether as a result of new information, future events
or otherwise.



5



---

##### Table of Contents

PART I



|ITEM 1. | Identity of Directors, Senior Management and Advisers
|------- | -----------------------------------------------------



Not required.



|ITEM 2. | Offer Statistics and Expected Timetable
|------- | ---------------------------------------



Not required.



|ITEM 3. | Key Information
|------- | ---------------



|A.    Selected | Financial Data
|-------------- | --------------



The following selected consolidated statement of operations data and consolidated balance sheet data present a summary of our historical consolidated
financial information at December 31, 2003, 2002, 2001, 2000 and 1999 and for the years then ended and are derived from our consolidated financial statements and related notes, which have been audited by Ernst & Young (CIS) Limited. The selected
financial data set forth below should be read in conjunction with our consolidated financial statements and their related notes and the section of this Annual Report on Form 20-F entitled Item 5Operating and Financial Review and
Prospects.



|                                                                                                                       |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|---------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------- | --------- | - | ---- | --- | ------- | ---- |  | --- | ------- | - |  | ---- | ------- | - |  | --- | ------- | -
|                                                                                                                       |  | Years Ended December 31,                                             |          
|                                                                                                                       |  | 2003                                                                 |           |   | 2002 |     |         | 2001 |  |     | 2000    |   |  | 1999 |        
|                                                                                                                       |  | (In thousands of U.S. dollars, except per share and per ADS amounts) |          
|Operating revenues:                                                                                                    |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|Service revenues and connection fees                                                                                   |  | US$                                                                  | 1,266,662 |   |      | US$ | 727,868 |      |  | US$ | 383,321 |   |  | US$  | 252,333 |   |  | US$ | 206,542 |  
|Sales of handsets and accessories                                                                                      |  |                                                                      | 64,975    |   |      |     | 49,934  |      |  |     | 43,228  |   |  |      | 32,031  |   |  |     | 31,457  |  
|Other revenues                                                                                                         |  |                                                                      | 3,961     |   |      |     | 1,842   |      |  |     | 1,347   |   |  |      | 1,309   |   |  |     | 638     |  
|                                                                                                                       |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|Total operating revenues                                                                                               |  |                                                                      | 1,335,598 |   |      |     | 779,644 |      |  |     | 427,896 |   |  |      | 285,673 |   |  |     | 238,637 |  
|Less revenue-based taxes                                                                                               |  |                                                                      |          |   |      |     | (11,148 | )    |  |     | (5,294  | ) |  |      | (11,537 | ) |  |     | (12,232 | )
|                                                                                                                       |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|Net operating revenues                                                                                                 |  |                                                                      | 1,335,598 |   |      |     | 768,496 |      |  |     | 422,602 |   |  |      | 274,136 |   |  |     | 226,405 |  
|Operating expenses:                                                                                                    |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|Service costs                                                                                                          |  |                                                                      | 191,441   |   |      |     | 111,387 |      |  |     | 74,097  |   |  |      | 61,326  |   |  |     | 56,779  |  
|Cost of handsets and accessories sold                                                                                  |  |                                                                      | 54,044    |   |      |     | 41,764  |      |  |     | 37,591  |   |  |      | 34,187  |   |  |     | 37,345  |  
|Selling, general and administrative expenses                                                                           |  |                                                                      | 467,655   |   |      |     | 271,963 |      |  |     | 149,052 |   |  |      | 108,482 |   |  |     | 88,704  |  
|Depreciation                                                                                                           |  |                                                                      | 151,262   |   |      |     | 85,204  |      |  |     | 48,690  |   |  |      | 47,458  |   |  |     | 44,801  |  
|Amortization                                                                                                           |  |                                                                      | 34,064    |   |      |     | 12,213  |      |  |     | 12,616  |   |  |      | 12,564  |   |  |     | 9,998   |  
|Impairment of long-lived assets                                                                                        |  |                                                                      |          |   |      |     |        |      |  |     |        |   |  |      | 66,467  |   |  |     |        |  
|Provision for doubtful accounts                                                                                        |  |                                                                      | 9,228     |   |      |     | 21,173  |      |  |     | 13,406  |   |  |      | 18,148  |   |  |     | 17,845  |  
|                                                                                                                       |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|Total operating expenses                                                                                               |  |                                                                      | 907,694   |   |      |     | 543,704 |      |  |     | 335,452 |   |  |      | 348,632 |   |  |     | 255,472 |  
|                                                                                                                       |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|Operating income (loss)                                                                                                |  |                                                                      | 427,904   |   |      |     | 224,792 |      |  |     | 87,150  |   |  |      | (74,496 | ) |  |     | (29,067 | )
|Other income and expenses:                                                                                             |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|Interest income                                                                                                        |  |                                                                      | 8,378     |   |      |     | 7,169   |      |  |     | 5,733   |   |  |      | 4,039   |   |  |     | 1,756   |  
|Other income                                                                                                           |  |                                                                      | 6,296     |   |      |     | 3,903   |      |  |     | 2,517   |   |  |      | 2,133   |   |  |     | 1,659   |  
|Interest expense                                                                                                       |  |                                                                      | (68,246   | ) |      |     | (46,586 | )    |  |     | (26,865 | ) |  |      | (21,089 | ) |  |     | (16,074 | )
|Other expense                                                                                                          |  |                                                                      | (3,251    | ) |      |     | (2,142  | )    |  |     | (2,578  | ) |  |      | (25     | ) |  |     | (189    | )
|Net foreign exchange loss                                                                                              |  |                                                                      | (1,279    | ) |      |     | (9,439  | )    |  |     | (110    | ) |  |      | (2,661  | ) |  |     | (2,572  | )
|                                                                                                                       |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|Total other income and expenses                                                                                        |  |                                                                      | (58,102   | ) |      |     | (47,095 | )    |  |     | (21,303 | ) |  |      | (17,603 | ) |  |     | (15,420 | )
|                                                                                                                       |  |                                                                      |           |   |      |     |         |      |  |     |         |   |  |      |         |   |  |     |         |  
|Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principle           |  |                                                                      | 369,802   |   |      |     | 177,697 |      |  |     | 65,847  |   |  |      | (92,099 | ) |  |     | (44,487 | )
|Income tax expense (benefit)                                                                                           |  |                                                                      | 108,641   |   |      |     | 49,939  |      |  |     | 18,539  |   |  |      | (14,343 | ) |  |     | (5,564  | )
|Minority interest in net earnings (losses) of subsidiaries, before cumulative effect of change in accounting principle |  |                                                                      | 26,872    |   |      |     | (1,794  | )    |  |     | 7       |   |  |      | 45      |   |  |     | 673     |  



6



---

##### Table of Contents

|                                                                                                       |  |                                                                      |         |   |      |     |         |  |      |        |  |      |         |   |  |     |         |  
|------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------- | ------- | - | ---- | --- | ------- |  | ---- | ------ |  | ---- | ------- | - |  | --- | ------- | -
|                                                                                                       |  | Years Ended December 31,                                             |        
|                                                                                                       |  | 2003                                                                 |         |   | 2002 |     | 2001    |  | 2000 |        |  | 1999 |        
|                                                                                                       |  | (In thousands of U.S. dollars, except per share and per ADS amounts) |        
|Income (loss) before cumulative effect of change in accounting principle                               |  |                                                                      | 234,289 |   |      |     | 129,552 |  |      | 47,301 |  |      | (77,801 | ) |  |     | (39,596 | )
|                                                                                                       |  |                                                                      |         |   |      |     |         |  |      |        |  |      |         |   |  |     |         |  
|Cumulative effect of change in accounting principal net of tax of US$120                               |  |                                                                      | (379    | ) |      |     |        |  |      |       |  |      |        |   |  |     |        |  
|Minority interest in cumulative effect of change in accounting principle                               |  |                                                                      | 52      |   |      |     |        |  |      |       |  |      |        |   |  |     |        |  
|                                                                                                       |  |                                                                      |         |   |      |     |         |  |      |        |  |      |         |   |  |     |         |  
|Net income (loss)                                                                                      |  | US$                                                                  | 233,962 |   |      | US$ | 129,552 |  | US$  | 47,301 |  | US$  | (77,801 | ) |  | US$ | (39,596 | )
|                                                                                                       |  |                                                                      |         |   |      |     |         |  |      |        |  |      |         |   |  |     |         |  
|Weighted average common shares outstanding                                                             |  |                                                                      | 38,241  |   |      |     | 38,014  |  |      | 33,642 |  |      | 30,264  |   |  |     | 23,181  |  
|Income (loss) before cumulative effect of change in accounting principle per common share              |  | US$                                                                  | 6.13    |   |      | US$ | 3.41    |  | US$  | 1.41   |  | US$  | (2.57)  |   |  | US$ | (1.71)  |  
|Income (loss) before cumulative effect of change in accounting principle per ADS equivalent(1)         |  | US$                                                                  | 4.60    |   |      | US$ | 2.56    |  | US$  | 1.06   |  | US$  | (1.93)  |   |  | US$ | (1.28)  |  
|Net income (loss) per common share                                                                     |  | US$                                                                  | 6.12    |   |      | US$ | 3.41    |  | US$  | 1.41   |  | US$  | (2.57)  |   |  | US$ | (1.71)  |  
|Net income (loss) per ADS equivalent(1)                                                                |  | US$                                                                  | 4.59    |   |      | US$ | 2.56    |  | US$  | 1.06   |  | US$  | (1.93)  |   |  | US$ | (1.28)  |  
|Weighted average diluted shares                                                                        |  |                                                                      | 46,770  |   |      |     | 44,489  |  |      | 40,068 |  |      | 30,264  |   |  |     | 23,181  |  
|Diluted income (loss) before cumulative effect of change in accounting principle per common share(2)   |  | US$                                                                  | 5.23    |   |      | US$ | 2.91    |  | US$  | 1.18   |  | US$  | (2.57)  |   |  | US$ | (1.71)  |  
|Diluted income (loss) before cumulative effect of change in accounting principle per ADS equivalent(1) |  | US$                                                                  | 3.92    |   |      | US$ | 2.18    |  | US$  | 0.89   |  | US$  | (1.93)  |   |  | US$ | (1.28)  |  
|Diluted net income (loss) per common share(2)                                                          |  | US$                                                                  | 5.22    |   |      | US$ | 2.91    |  | US$  | 1.18   |  | US$  | (2.57)  |   |  | US$ | (1.71)  |  
|Diluted net income (loss) per ADS equivalent(2)                                                        |  | US$                                                                  | 3.92    |   |      | US$ | 2.18    |  | US$  | 0.89   |  | US$  | (1.93)  |   |  | US$ | (1.28)  |  
|Dividends per share                                                                                    |  |                                                                      |        |   |      |     |        |  |      |       |  |      |        |   |  |     |        |  

---

|(1) | Each American Depositary Share (ADS) is equivalent to three-quarters of one share of common stock.
|--- | ----------------------------------------------------------------------------------------------------

|(2) | Diluted income (loss) before cumulative effect of change in accounting principle and net income (loss) per common share and ADS equivalent includes dilution for all shares of our
convertible preferred stock, senior convertible notes and our employee stock options in the periods when these shares, notes and options had a dilutive effect (the years ended December 31, 2003, 2002 and 2001 for all shares of our convertible
preferred stock, the year ended December 31, 2003 for senior convertible notes and the years ended December 31, 2003 and 2002 for our employee stock options).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                            |  |                                |           |   |      |     |           |  |      |         |      |     |         |  |     |         |  
|------------------------------------------------------------------------------------------- |  | ------------------------------ | --------- | - | ---- | --- | --------- |  | ---- | ------- | ---- | --- | ------- |  | --- | ------- | -
|                                                                                            |  | At December 31,                |          
|                                                                                            |  | 2003                           |           |   | 2002 |     | 2001      |  | 2000 |         | 1999 |    
|                                                                                            |  | (In thousands of U.S. dollars) |          
|Consolidated balance sheet data:                                                            |  |                                |           |   |      |     |           |  |      |         |      |     |         |  |     |         |  
|Cash, cash equivalents and short-term investments                                           |  | US$                            | 157,611   |   |      | US$ | 263,657   |  | US$  | 145,092 |      | US$ | 152,691 |  | US$ | 36,112  |  
|Working capital (deficit)                                                                   |  |                                | (167,409  | ) |      |     | 69,582    |  |      | 52,146  |      |     | 122,270 |  |     | (38,782 | )
|Property and equipment, net                                                                 |  |                                | 1,460,542 |   |      |     | 957,602   |  |      | 535,405 |      |     | 356,666 |  |     | 369,053 |  
|Telecommunications licenses and allocations of frequencies and other intangible assets, net |  |                                | 163,186   |   |      |     | 144,115   |  |      | 70,926  |      |     | 79,649  |  |     | 82,991  |  
|Total assets                                                                                |  |                                | 2,302,232 |   |      |     | 1,692,744 |  |      | 925,806 |      |     | 700,315 |  |     | 590,095 |  
|Total debt, including current portion(1)                                                    |  |                                | 606,991   |   |      |     | 650,580   |  |      | 277,673 |      |     | 222,764 |  |     | 161,338 |  
|Total liabilities                                                                           |  |                                | 1,304,016 |   |      |     | 1,030,081 |  |      | 417,685 |      |     | 331,692 |  |     | 289,107 |  
|Total shareholders equity                                                                  |  | US$                            | 998,216   |   |      | US$ | 662,663   |  | US$  | 508,121 |      | US$ | 368,623 |  | US$ | 300,988 |  

---

|(1) | Includes bank loans (including our loan from J.P. Morgan AG (funded by the issuance of loan participation notes by J.P. Morgan AG) as of December 31, 2003 and 2002), equipment
financing, capital lease obligations as of December 31, 2003, 2002, 2001 and 1999, and the senior convertible notes as of December 31, 2002, 2001 and 2000.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7



---

##### Table of Contents

Selected Operating Data



The following selected operating data at December 31, 2003, 2002, 2001, 2000 and 1999 and for the years then ended have been
derived from our company and from independent sources that we believe to be reliable. The selected operating data set forth below should be read in conjunction with our consolidated financial statements and their related notes and the section of
this Annual Report on Form 20-F entitled Item 5Operating and Financial Review and Prospects.



|                                                         |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|-------------------------------------------------------- |  | --------------- | ----------- | - | ---- | --- | ----------- | ---- |  | --- | ----------- | - |  | ---- | ----------- | - |  | --- | ----------- | -
|                                                         |  | At December 31, |            
|                                                         |  | 2003            |             |   | 2002 |     |             | 2001 |  |     | 2000        |   |  | 1999 |            
|Selected industry operating data:                        |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|Estimated population:                                    |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|Moscow license area(1)                                   |  |                 | 16,984,800  |   |      |     | 16,984,800  |      |  |     | 15,001,800  |   |  |      | 15,001,800  |   |  |     | 15,038,700  |  
|Russia(2)                                                |  |                 | 145,181,900 |   |      |     | 145,181,900 |      |  |     | 146,181,800 |   |  |      | 143,541,666 |   |  |     | 150,555,555 |  
|Estimated subscribers:                                   |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|Moscow license area(3)                                   |  |                 | 11,487,300  |   |      |     | 7,201,400   |      |  |     | 4,110,200   |   |  |      | 1,993,600   |   |  |     | 785,000     |  
|Russia(3)                                                |  |                 | 36,230,000  |   |      |     | 18,005,000  |      |  |     | 8,040,000   |   |  |      | 3,445,000   |   |  |     | 1,355,000   |  
|Penetration rate:                                        |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|Moscow license area(4)                                   |  |                 | 67.6        | % |      |     | 42.4        | %    |  |     | 27.4        | % |  |      | 13.3        | % |  |     | 5.2         | %
|Russia(5)                                                |  |                 | 25.0        | % |      |     | 12.4        | %    |  |     | 5.5         | % |  |      | 2.4         | % |  |     | 0.9         | %
|Selected company operating data:                         |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|End of period subscribers:                               |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|Moscow license area                                      |  |                 | 5,659,600   |   |      |     | 3,712,700   |      |  |     | 1,911,200   |   |  |      | 780,100     |   |  |     | 350,400     |  
|The regions(6)                                           |  |                 | 5,777,300   |   |      |     | 1,440,400   |      |  |     | 200,300     |   |  |      | 53,500      |   |  |     | 21,700      |  
|Total subscribers                                        |  |                 | 11,436,900  |   |      |     | 5,153,100   |      |  |     | 2,111,500   |   |  |      | 833,600     |   |  |     | 372,100     |  
|                                                         |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|Market share:                                            |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|Moscow license area subscribers(3)                       |  |                 | 49.3        | % |      |     | 51.6        | %    |  |     | 46.5        | % |  |      | 39.1        | % |  |     | 44.6        | %
|Russian subscribers(7)                                   |  |                 | 31.6        | % |      |     | 28.6        | %    |  |     | 26.3        | % |  |      | 24.2        | % |  |     | 27.5        | %
|Estimated coverage of Moscow license area (sq. km)(8)    |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|D-AMPS                                                   |  |                 | 40,000      |   |      |     | 40,000      |      |  |     | 39,700      |   |  |      | 39,700      |   |  |     | 37,400      |  
|GSM                                                      |  |                 | 46,770      |   |      |     | 46,770      |      |  |     | 46,500      |   |  |      | 44,200      |   |  |     | 34,000      |  
|Monthly average minutes of use per user (MOU)(9)       |  |                 | 89.8        |   |      |     | 92.3        |      |  |     | 105.3       |   |  |      | 90.6        |   |  |     | 137.0       |  
|Moscow license area MOU                                  |  |                 | 87.9        |   |      |     | 93.6        |      |  |     | 106.1       |   |  |      | N/A         |   |  |     | N/A         |  
|Regional MOU                                             |  |                 | 92.4        |   |      |     | 84.7        |      |  |     | 85.5        |   |  |      | N/A         |   |  |     | N/A         |  
|Monthly average revenue per subscriber (ARPU)(10)      |  | US$             | 13.6        |   |      | US$ | 18.3        |      |  | US$ | 26.2        |   |  | US$  | 37.2        |   |  | US$ | 98.6        |  
|Moscow license area ARPU                                 |  | US$             | 16.4        |   |      | US$ | 19.4        |      |  | US$ | 26.5        |   |  |      | N/A         |   |  |     | N/A         |  
|Regional ARPU                                            |  | US$             | 10.8        |   |      | US$ | 12.4        |      |  | US$ | 21.9        |   |  |      | N/A         |   |  |     | N/A         |  
|Churn rate(11)                                           |  |                 | 39.3        | % |      |     | 30.8        | %    |  |     | 23.0        | % |  |      | 34.0        | % |  |     | 25.0        | %
|Moscow license area churn rate                           |  |                 | 46.6        | % |      |     | 33.9        | %    |  |     | 23.7        | % |  |      | N/A         |   |  |     | N/A         |  
|Regional churn rate                                      |  |                 | 29.2        | % |      |     | 14.5        | %    |  |     | 8.9         | % |  |      | N/A         |   |  |     | N/A         |  
|Number of Moscow license area operational base stations: |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|D-AMPS                                                   |  |                 | 310         |   |      |     | 314         |      |  |     | 318         |   |  |      | 318         |   |  |     | 302         |  
|GSM                                                      |  |                 | 2,372       |   |      |     | 1,721       |      |  |     | 1,072       |   |  |      | 735         |   |  |     | 485         |  
|Number of regional operational base stations:            |  |                 |             |   |      |     |             |      |  |     |             |   |  |      |             |   |  |     |             |  
|D-AMPS                                                   |  |                 | 106         |   |      |     | 106         |      |  |     | 94          |   |  |      | N/A         |   |  |     | N/A         |  
|GSM                                                      |  |                 | 4,224       |   |      |     | 1,378       |      |  |     | 292         |   |  |      | N/A         |   |  |     | N/A         |  

---

|(1) | The Moscow license area includes the City of Moscow and the area constituting the Moscow region. Population statistics for 1999 to 2003 were published by Goskomstat.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Estimated population statistics for 2003 and 2002 were published by Goskomstat. Estimated population statistics for 1999 through 2001 are derived from the subscriber and penetration
rate figures published by Json & Partners and Sotovik.ru.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Estimated subscribers for 2002 and 2003 published by AC&M Consulting. Estimated subscribers for 1999 through 2001 published by Json & Partners and Sotovik.ru.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Total estimated Moscow license area subscribers expressed as a percentage of the estimated population of the Moscow license area.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(5) | Penetration rate for 2002 and 2003 is equal to the total estimated Russian subscribers expressed as a percentage of the estimated population of Russia. Penetration rate for 1999
through 2001 published by Json & Partners and Sotovik.ru.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Represents the total number of our GSM and AMPS/D-AMPS subscribers in the regions outside of the Moscow license area, including subscribers on networks of some of our subsidiaries
and affiliates.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Market share of Russian subscribers is our estimated Russian subscribers expressed as a percentage of the estimated total number of subscribers.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------



8



---

##### Table of Contents

|(8) | The Moscow license area is approximately 47,000 square kilometers.
|--- | ------------------------------------------------------------------

|(9) | Monthly MOU is calculated for each month of the relevant period by dividing the total number of billable minutes of usage for incoming and outgoing calls during that month
(excluding guest roamers) by the average number of subscribers during the month.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Monthly ARPU is used to measure the average monthly service revenue on a per subscriber basis. Monthly ARPU is calculated for each month in the relevant period as our service
revenue during that month, including roaming revenue, but excluding revenue from connection fees and revenue from rent of fiber-optic channels, divided by the average number of our subscribers during the month. See Item 5. Operating and
Financial Review and ProspectsAdditional Reconciliations of Non-U.S. GAAP Financial Measures (Unaudited) for calculation of our ARPU and for more information regarding our use of ARPU as a non-U.S. GAAP financial measure.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Churn rate means the total number of subscribers disconnected from our network in a given period expressed as a percentage of the midpoint of the number of our subscribers at the
beginning and end of that period. Migration of our subscribers from our D-AMPS network to our GSM network, as well as migration between tariff plans were technically recorded as churn, thereby contributing to the aggregate increase in the churn rate
for the period between 1999 and 2003, although we did not lose these subscribers.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|B. | Capitalization and Indebtedness
|-- | -------------------------------



Not required.



|C. | Reasons for the Offer and Use of Proceeds
|-- | -----------------------------------------



Not required.



|D. | Risk Factors
|-- | ------------



The risk factors below are associated with our company and our ADSs. Before purchasing our ADSs, you should carefully consider all of the information
set forth in this Annual Report on Form 20-F and, in particular, the risks described below. If any of the following risks actually occur, our business, financial condition or results of operations could be harmed. In that case, the trading price of
our ADSs could decline and you could lose all or part of your investment.



The risks and uncertainties below are not the only ones we face, but represent the risks that we believe are material. However, there may be additional risks that we currently consider not to be material or of
which we are not currently aware and these risks could have the effects set forth above.



Risks Related to Our Business



If our
agency relationship with KB Impuls is determined to violate Russian law and KB Impulss license for the Moscow license area is suspended or terminated, our business will be materially adversely affected.



On January 9, 2004, KB Impuls officially received a notice dated December 30,
2003 from the local regulatory arm of the former Ministry of Communications, the Moscow Department on Supervision over Communications and Informatization in the Russian Federation, which we refer to in this Annual Report on Form 20-F as Moscow
Gossvyaznadzor. The notice contained a provision that raised issues regarding the adequacy of the documentation of the agency relationship pursuant to which our company acts as KB Impulss agent for concluding agreements with KB Impulss
Moscow GSM subscribers. In the relevant notice provision, Moscow Gossvyaznadzor used certain technical drafting issues in the subscriber agreements and the agency agreement as a basis for asserting first, that KB Impuls does not have any agreements
with subscribers and, therefore, has violated Russian law, and second, that our agency agreement with KB Impuls does not specifically provide that we will sign subscriber agreements on behalf of KB Impuls, also in violation of Russian law. The
notice did not specify the remedial action to be taken and requests to the authorities for clarification on action to be taken by KB Impuls were not answered. The notice specified that the violations in this provision were to be cured by February 1,
2004. Notwithstanding this uncertainty and our belief that there were no violations of Russian law, in January 2004, we amended our form of subscriber agreements concluded on behalf of KB Impuls and we amended our agency agreement with KB Impuls in
an attempt to address concerns raised by Moscow Gossvyaznadzor. However, due to the lack of clarification, there can be no assurance that such amendments would be deemed to have cured any violations alleged by Moscow Gossvyaznadzor.



9



---

##### Table of Contents

KB Impuls challenged the provision in the Moscow Gossvyaznadzor notice that questioned the agency
relationship between KB Impuls and our company and on March 18, 2004, the Moscow Arbitrazh Court ruled in favor of KB Impuls and invalidated the relevant provision of the December 30, 2003 notice. Moscow Gossvyaznadzor attempted to involve the
Moscow Prosecutors office in the case, but this motion was defeated. On April 28, 2004, we received the appeal filed by Moscow Gossvyaznadzor on April 23, 2004. Moscow Gossvyaznadzor has publicly stated that it has never lost a case regarding
a notice it has issued. We cannot assure you of a favorable outcome to this dispute. If Moscow Gossvyaznadzor were to prevail in the appeal, it is unclear whether steps already taken would be deemed to have cured the alleged violations, what steps
we would be required to take in order to cure the alleged violation and whether we could do so within the time period to be allocated to us. As of the date of this Annual Report on Form 20-F, claims by subscribers based on similar arguments as those
used by Moscow Gossvyaznadzor with respect to our agency relationship with KB Impuls have been heard in two other courts and the court in one of these cases (the court in the City of Chekhov in the Moscow region) recently ruled in favor of a
subscriber, terminating the subscribers agreement with us on the basis of, among other things, the argument that there was no agency relationship between VimpelCom and KB Impuls. In that case, we were not ordered to make any payments to the
subscriber and the subscriber has appealed the portion of the ruling denying his claim for reimbursement of fees paid by him and damages. We plan to appeal the Chekhov courts ruling. If we are ultimately found to have violated Russian law in
connection with our agency relationship with KB Impuls, KB Impulss GSM license for the Moscow license area may be suspended or terminated, we may face additional lawsuits from subscribers and other parties on a similar basis, VimpelCom may be
unable to receive revenue on behalf of KB Impuls from subscribers in the Moscow license area and our business would be materially adversely affected. An adverse outcome may also trigger defaults under the loan from J.P. Morgan AG to our company,
which was funded by the issuance of loan participation notes by J.P. Morgan AG, and other debt agreements to which we are a party.



We may be the subject of criminal investigations that may result in unfavorable outcomes that could materially adversely affect our business.



On February 4, 2004, our company received a resolution issued by the Moscow
Prosecutors office declaring the initiation of a criminal case stemming from allegations by a small Moscow-based company that claimed that we operated our business without a license. We immediately appealed the move by the Moscow
Prosecutors office and subsequently received an official notice from the Moscow Prosecutors office stating that because there was no basis for the case against us, that the case had been dismissed. The company that initially made the
allegations has reportedly filed an appeal of this decision and we cannot assure you that the decision to dismiss the criminal case will be upheld on appeal. In addition, there is no assurance that there will be no other criminal investigations
launched into the activities of our group. Criminal investigations into our activities may have a material adverse effect on our business.



We are subject to civil claims and administrative claims by our subscribers that may result in unfavorable outcomes that could materially adversely affect our
business.



Several subscribers have filed civil suits
against our company and KB Impuls challenging our agency relationship with KB Impuls, claiming that VimpelCom provides telecommunications services without a license, and/or claiming that their subscriber agreements should be terminated and they
should be compensated for all amounts paid to us. The former Ministry of Communications has been brought into certain of these suits as a third party and has assisted the subscriber in each of the cases in which it is involved. In addition, there
have been attempts to bring other parties into these cases, including other regulatory bodies, but to date, these motions have been defeated. We have successfully defended our agency relationship against one such claim by a subscriber in a court in
the City of Moscow, but on April 15, 2004, a court in the City of Chekhov in the Moscow region ruled in favor of a subscriber, terminating the subscribers agreement with us on the basis of the argument that there is no agency relationship
between VimpelCom and KB Impuls and that VimpelCom was unjustly enriched when it accepted payments from subscribers on behalf of KB Impuls. Although in this case we were not ordered to make any payments to the subscriber, based on the
reasoning of the ruling, we may be required to



10



---

##### Table of Contents

do so on other subscriber claims. The subscriber has appealed the portion of the ruling denying his claim for reimbursement and damages and we plan to appeal
the ruling. Furthermore, the tax authorities and other regulatory bodies may also file claims against us if, among other things, our subscriber agreements are declared invalid or terminated in this manner. In addition, certain claims have not yet
been heard and other claims remain subject to further appeal. We cannot assure you that we will ultimately prevail in these cases. Although the monetary value of each claim currently pending may not be material, our business may be adversely
affected if management is forced to focus its attention and the companys resources toward defending the company against these and similar claims, should they arise. Additionally, although Russian court rulings are not generally binding on
other Russian courts, rulings that are unfavorable to us may have persuasive force in other cases brought against us and they may make us more vulnerable to unfavorable rulings in pending cases or in cases that may be brought in the future by other
subscribers, groups of subscribers or third parties on similar grounds or on the basis of different arguments. An increase in the number of claims brought against us may cause management to expend additional time and resources to resolve such claims
and may ultimately have a material adverse effect on our business and results of operations. In addition, the tax authorities and other regulatory bodies may also file claims against us if, among other things, our subscriber agreements are declared
invalid.



Additionally, several subscribers have filed claims
against us alleging that we have engaged in fraudulent advertising, that the quality of our telecommunications services is not acceptable and that our contracts violate their rights. Certain subscribers have also filed similar complaints with the
anti-monopoly authorities and the communications regulatory bodies, as well as complaints with these bodies alleging that their rights were violated as a result of our agency relationship with KB Impuls. In at least one case, the anti-monopoly
authority in the Sverdlovsk region has reportedly found in favor of two subscribers, ruling that the terms of our prepaid contracts violated the subscribers rights because unspent amounts under their prepaid contracts were not refunded when
the contracts were terminated by the subscribers. We plan to appeal this ruling. There is reportedly coordination among some of these subscribers, as well as with the company that made allegations leading to the initiation of the criminal case. Some
or all of these rulings referred to above may be appealed and other cases have not yet been decided. We cannot assure you that similar claims will not be filed or that the rulings taken by the courts in the future will be in our favor, and adverse
decisions may have an adverse effect on our group.



If we are unable to
complete our mergers with VimpelCom-Region or KB Impuls or some or all of VimpelCom-Regions and KB Impulss licenses, frequencies and other permissions are not transferred or reissued to us during the merger process, our business may be
materially adversely affected.



On October 24, 2003, our
shareholders approved the merger of VimpelCom-Region into VimpelCom, and, on April 16, 2004, our shareholders approved amendments to our charter reflecting the merger. The amendments have not yet been registered. On March 24, 2004, our board of
directors recommended the merger of KB Impuls into VimpelCom for approval by our shareholders at our upcoming annual meeting of shareholders on May 26, 2004. We initiated the VimpelCom-Region merger process to create a stronger platform for future
expansion, simplify our companys capital structure and give our company full exposure to the growth potential in the regions. Although we will continue to own 55.3% of VimpelCom-Region in the event that the merger is not completed, we will not
realize the full benefits of a simplified capital structure, including the benefits associated with the elimination of our minority interest. We initiated the KB Impuls merger largely in response to public statements by the then-acting Minister of
Communications that the re-issuance of the licenses held by KB Impuls to our company would resolve the regulatory dispute with Moscow Gossvyaznadzor. The merger of KB Impuls into our company is subject to shareholder approval and other conditions
precedent and the mergers of KB Impuls and VimpelCom-Region into VimpelCom are subject to the transfer or reissuance of VimpelCom-Regions and KB Impulss licenses, frequencies and other permissions to VimpelCom. After these conditions are
met, certain technical steps will need to be completed to finalize the mergers.



The current legal and regulatory regime is unclear about the timing or procedure of the transfer or reissuance of VimpelCom-Regions and KB Impulss licenses, frequencies and other permissions to VimpelCom



11



---

##### Table of Contents

in the event of a merger or reorganization and this may delay or result in the non-completion of the mergers of VimpelCom-Region and KB Impuls into
VimpelCom. The new Law On Communications, or the New Law, which came inte effect on January 1, 2004, contains a series of provisions applicable to the reissuance of licenses, including in connection with a merger or a reorganization of a
licensee. It is unclear which of the provisions set forth in the New Law apply to different types of reorganizations. In the case of a merger of one entity into another, with the latter being the legal successor to the former, it might be reasonable
to conclude that three different provisions of the New Law apply, but these provisions are contradictory. For instance, certain of these provisions require the licensee to submit the application for the transfer of a license to the successor entity
while another of these provisions requires the legal successor to submit the application; in the case of the mergers of each of VimpelCom-Region and KB Impuls into VimpelCom, these two entities are different. Furthermore, if the rules are
interpreted to require the application to be filed within 30 days after a merger or consolidation is complete (i.e., in the case of the mergers of VimpelCom-Region and KB Impuls into VimpelCom, after the licensee ceases to exist and all of its
rights and obligations are transferred to VimpelCom, which will be the legal successor), it is unclear under the New Law whether services may continue to be provided under the initial license during the 30 day period. While we initially filed an
application to transfer the VimpelCom-Region licenses to VimpelCom on March 5, 2004, due to the subsequent reorganization of the government we were advised to resubmit our application at a later date. On March 25, 2004, we submitted a new request to
transfer the VimpelCom-Region licenses to VimpelCom. To date, we have received no correspondence concerning this request.



Because of the uncertainty related to the New Law, there can be no assurance that the licenses, frequencies and other permissions of VimpelCom-Region and
KB Impuls will be transferred or reissued to VimpelCom in a timely and complete manner allowing the mergers to be completed in a timely fashion and their advantages and benefits fully realized. Furthermore, as a result of the reorganization of the
Russian government, not all of the officials within the Ministry of Transport and Communications and related government agencies who will be responsible for this transfer or reissuance have been appointed, and not all of the implementing regulations
have been promulgated. As a result, the timing of the transfer or reissuance of the licenses, frequencies and permissions and of the planned mergers is uncertain. A substantial delay in our planned mergers or the failure to transfer or reissue some
or all of VimpelCom-Regions or KB Impulss licenses, frequencies and other permissions may materially adversely affect our business.



MegaFon, a new national telecommunications operator, may receive preferential treatment from the regulatory authorities and benefit from the resources of its
shareholders, potentially giving it a substantial competitive advantage over us.



One of our national competitors is Open Joint Stock Company, MegaFon, which we refer to in this Annual Report on Form 20-F as MegaFon. MegaFon was formed on May 29, 2002 with the intention of merging nine
regional mobile phone operators. The nine companies which comprise the MegaFon group together hold licenses to provide GSM 900/1800 cellular communications service in all 89 administrative regions of the Russian Federation. In addition, all of the
companies in the MegaFon group have instituted a unified intranetwork roaming tariff and are expected to introduce unified tariffs in each of the regions in which they operate. These factors could undermine our plans to expand in regions outside of
the Moscow license area and diminish the competitive advantage we hope to enjoy from our creation of a single, integrated national network.



In the Moscow license area, we also compete with Closed Joint Stock Company Sonic Duo, or Sonic Duo, a wholly-owned subsidiary of MegaFon.
Sonic Duo received a dual band GSM-900/1800 license for the Moscow license area in May 2000, began providing roaming services in Moscow to subscribers of other wireless operators in the third quarter of 2001 and commenced operations in Moscow in
late November 2001. Sonic Duo markets its services in Moscow under the MegaFon brand name. According to Json & Partners and Sotovik.ru, Sonic Duo had approximately 850,000 subscribers as of December 31, 2003, representing a subscriber
market share of approximately 7.4%. The entry of Sonic Duo into the Moscow license area led to additional price competition among the GSM operators in Moscow.



12



---

##### Table of Contents

According to press reports and information on MegaFons website, MegaFon is owned by Telecominvest,
CT Mobile, TeliaSonera, a leading Scandinavian telecommunications operator, IPOC International Growth Fund and Westlink Funds. In turn, Telecominvest is 15.0% owned by North-West Telecom, a subsidiary of Svyazinvest, 36.0% by TeliaSonera and 59.0%
by First National Holding, which has been linked in the press to IPOC. Alfa Group, one of our shareholders, acquired CT Mobile in 2003 following approval of our board of directors to the granting of consent by our company to Alfa Groups
acquisition. The consent contemplates that the parties will explore the possibility of a business combination between MegaFon and our company. According to press reports, the acquisition is being disputed by some of the shareholders. Svyazinvest is
effectively controlled by the Russian government. Press reports have noted that in the past Megafon received preferential treatment in regulatory matters and have pointed to the previous involvement of some government officials in entities related
to MegaFon as potential reasons for such treatment. If MegaFon receives favorable treatment from government officials in the future or if our company is singled out for unfavorable treatment by government officials as a result of disputes between
third parties, our business could be adversely affected.



We face intense
competition from an increasing number of strong competitors.



Competition among telecommunications service providers in Russia is intense and increasing as providers are utilizing new marketing efforts to retain existing subscribers and attract new ones. For example, wireless service providers in the
Moscow license area, including us, have lowered tariffs and, from time to time, offered handset subsidies. Our efforts to compete for subscribers based on reduced tariffs and lower equipment prices could greatly reduce our revenues and may not
succeed. If this occurs, it may be difficult for us to remain profitable in the future.



Our competitors have established and will continue to establish relationships with each other and with third parties. Our primary competitor in Russia, Open Joint Stock Company Mobile Telesystems, or MTS,
has relationships with third parties that have assets and other resources that may give MTS a substantial competitive advantage. Deutsche Telekom AG, a telecommunications company with significant telecommunications assets and experience, has
reported that it beneficially owns 25.2% of MTSs voting shares. Sistema, a diverse Russian holding company with interests in several telecommunications companies, recently reported that it beneficially owns 51.9% of MTSs voting shares.
MTS may have access to greater financial resources than our company in the future. We also compete with MegaFon, whose strategic partners include Telecominvest and TeliaSonera. Because of its strategic relationships, MegaFon has rapidly increased
the number of its subscribers in the Moscow license area and the regions and this has resulted in increased competition in the Russian telecommunications industry.



Current or future relationships among our competitors and third parties may restrict our access to critical systems and
resources. New competitors or alliances among competitors could rapidly acquire significant market share. We cannot assure you that we will be able to forge similar relationships or successfully compete against them.



Increased competition and a more diverse subscriber base have resulted in declining
average monthly service revenues per subscriber, which may adversely affect our results of operation.



While our subscriber base and revenues are growing as we continue to grow our operations in Moscow and to expand into regions outside of Moscow, our
average monthly service revenues per subscriber are decreasing. We expect to see a continued decline due to tariff decreases resulting from marketing competition and the increase of mass-market subscribers as a proportion of our overall subscriber
mix. This decline in our average monthly service revenues per subscriber may adversely affect our results of operation.



If we are unable to maintain our favorable brand image, we may be unable to attract new subscribers and retain existing subscribers, leading to loss of market share
and revenues.



We have expended significant time and
resources building the Bee Line GSM brand. Our ability to attract new subscribers and retain existing subscribers depends in part on our ability to maintain what we believe to be



13



---

##### Table of Contents

our favorable brand image. We cannot assure you that our brand image will not be adversely affected by our dispute with Moscow Gossvyaznadzor and legal
challenges by our subscribers. Negative rumors or claims by governmental authorities, individual subscribers and third parties or the commencement or continuation of criminal proceedings against our company regarding our services and advertising
could also adversely affect this brand image. In addition, consumer preferences change and our failure to anticipate, identify or react to these changes by providing attractive services at competitive prices could negatively affect our market share.
Any loss of market share resulting from any or all of these factors could negatively affect our results of operations.



We are required to route our international traffic from our GSM subscribers through Rostelecom but we cannot provide assurances that Rostelecom will have sufficient
capacity or that the regulator will confirm that our routing of traffic complies with this requirement.



Regulations enacted in late 2003 require GSM operators to route their international traffic through Rostelecom, a majority government-owned fixed line
operator. As a result, we have amended our agreements with Rostelecom to provide that traffic from all of our federal telephone numbers will be routed through Rostelecom and, to date, Rostelecom has been able to provide sufficient capacity. However,
there can be no assurance that Rostelecom will continue to be able to provide sufficient capacity to us as our subscriber base grows. Furthermore, international calls placed by our subscribers who have local Moscow numbers are routed through
alternate telecommunications providers who are required, according to our agreements with them, to route international traffic through Rostelecom. However, we have not received any confirmation to date from the regulatory bodies that routing the
traffic of our subscribers through these alternate providers to Rostelecom complies with these regulations and we cannot assure you that the alternate providers will route the international traffic of these subscribers through Rostelecom
notwithstanding their contractual obligations to do so. In addition, regulatory bodies have raised issues regarding the use of local Moscow telephone numbers assigned to alternate telecommunications providers by our subscribers and to date, have not
confirmed that our structure, pursuant to which we re-route calls through these alternate telecommunications providers, is consistent with the new regulations. Any finding by the regulator that we are not in compliance with any or all these
requirements could have an adverse effect on our business.



The public
switched telephone networks have reached capacity limits and need modernization, which may inconvenience our subscribers and will require us to make additional capital expenditures.



Due to the growth in fixed and mobile telephone use in Russia, long distance and local lines have, from time to time, become
overtaxed and cause incoming and outgoing calls to have lower completion rates. Additional investment is required to increase line capacity. In addition, continued growth in local, long-distance and international traffic, including that generated by
our subscribers, may require substantial investment in public switched telephone networks. Although the operators of public switched telephone networks are normally responsible for these investments, their weak financial condition may prevent them
from making these investments. Since we are financially strong relative to these public network operators, we may be compelled to make such investments on their behalf, placing an additional burden on our financial and human resources. Additionally,
assuming we do make such investments, we may not own the assets resulting from such investment. While we cannot estimate the financial and operating burdens associated with such investments, they may be substantial and may have a material adverse
effect on our business and results of operations.



Substantial leverage and
debt service obligations may adversely affect our cash flow.



We have substantial amounts of outstanding indebtedness, primarily our obligations under the following:



| |  | our obligations under the loan agreement with J.P. Morgan AG, pursuant to which J.P. Morgan AG extended a loan of US$250.0 million to our company, which was funded by the issuance
of loan participation notes by J.P. Morgan AG;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14



---

##### Table of Contents

| |  | our Russian ruble bond offering, pursuant to which we owe US$101.9 million to bondholders as of December 31, 2003;
| | - | ------------------------------------------------------------------------------------------------------------------



| |  | loans from Nordea Bank Sweden (publ) and Bayerische Hypo- und Vereinsbank AG and Svenska Handelsbanken AB; and
| | - | --------------------------------------------------------------------------------------------------------------



| |  | our obligations under vendor financing agreements with Alcatel SEL AG, General DataCom, and Technoserv.
| | - | -------------------------------------------------------------------------------------------------------



As of December 31, 2003, our total outstanding indebtedness was approximately US$607.0 million. Our consolidated
subsidiaries, which include KB Impuls and VimpelCom-Region, are the primary or sole obligors on US$293.3 million, or approximately 48.3%, of our actual total indebtedness. US$228.2 million of our total outstanding indebtedness was secured by our
equipment, securities and real property. If we incur additional indebtedness, the related risks that we now face could increase. Specifically, we may not be able to generate enough cash to pay the principal, premium (if any), interest and other
amounts due under our indebtedness.



Our substantial leverage
and the limits imposed by our debt obligations could have significant negative consequences, including:



| |  | limiting our ability to obtain additional financing or to refinance existing indebtedness;
| | - | ------------------------------------------------------------------------------------------



| |  | requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the amount of our cash flow available for other
purposes, including capital expenditures and marketing efforts;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | increasing our vulnerability to general adverse economic and industry conditions; and
| | - | -------------------------------------------------------------------------------------



| |  | limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete.
| | - | -----------------------------------------------------------------------------------------------------------------------



We must generate sufficient net cash flow in order to meet our debt service
obligations, and we cannot assure you that we will be able to meet such obligations. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, we would be in default under the terms of our
indebtedness and the holders of our indebtedness would be able to accelerate the maturity of such indebtedness and could cause defaults under our other indebtedness.



If we do not generate sufficient cash flow from operations in order to meet our debt service obligations, we may have to
undertake alternative financing plans to alleviate liquidity constraints, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital expenditures or seeking additional capital. We cannot assure you that any
refinancing or additional financing would be available on acceptable terms, or that assets could be sold, or if sold, of the timing of the sales and whether the proceeds realized from those sales would be sufficient to meet our debt service
obligations. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance debt on commercially reasonable terms, would materially adversely affect our business, financial condition, results of operation and
business prospects.



We are dependent on payments from KB Impuls to generate
funds necessary to meet our obligations.



Most of our
operating income and cash flow from operations is generated by our wholly-owned subsidiary KB Impuls. Our GSM license for the Moscow license area is held by KB Impuls. Although our company collects revenues derived from our Moscow GSM network on
behalf of KB Impuls under the terms of our service agreement, we do not hold legal title to such revenues. We charge fees for this and other services that we render to KB Impuls, but we do not have a security interest or a priority right over the
amounts collected on behalf of KB Impuls to ensure payment of these fees. As a result, we are dependent on the revenues of KB Impuls to generate funds necessary to meet our obligations, including our obligations under our loans from Nordea and
Bayerische and J.P. Morgan AG and our promissory notes issued to Technoserv and General DataCom. We



15



---

##### Table of Contents

expect that the funds necessary to meet our debt service obligations will be provided primarily by cash flow from our operations, payments under the service
agreement with KB Impuls, as well as debt repayments, dividends and distributions from KB Impuls or payments under service, agency and similar agreements and external financing. Our ability to obtain cash from KB Impuls to meet our debt service
obligations may be limited by contractual and legal restrictions on its ability to pay dividends and enter into transactions with VimpelCom and by its financial condition and requirements for cash to conduct its operations. For example, pursuant to
KB Impulss vendor financing agreements with Alcatel, KB Impuls may not pay any dividends if there is an event of default under any of its vendor financing agreements with Alcatel or the related guarantees given by our company, and, if there is
no such event of default, may pay dividends in a particular year to our company in an amount not greater than 80.0% of the net profits of KB Impuls for such year. Should an event of default occur under any such agreements or guarantees, KB Impuls
will be prevented from making any dividend distribution to our company and our revenues and results of operations may be materially adversely affected. For more information regarding KB Impulss indebtedness and related payment restrictions,
see Item 5Operating and Financial Review and ProspectsLiquidity and Capital ResourcesFinancing activities. Although some of these risks will be eliminated if our merger with KB Impuls is completed, we cannot assure you
that we will be able to obtain all of the necessary approvals or meet all of the conditions precedent in order to complete the merger with KB Impuls.



We may not be able to recover, or realize the value of, the debt investments that we make in KB Impuls or other subsidiaries.



We lend funds to, and make further debt investments in, one or more of our
subsidiaries under intercompany loan agreements and other types of contractual agreements. KB Impuls and VimpelCom-Region are also parties to third-party financing arrangements that restrict our ability to recover our investments in these
subsidiaries through the repayment of loans or dividends. For more information regarding VimpelCom-Regions indebtedness and related payment restrictions, see Item 5Operating and Financial Review and ProspectsLiquidity and
Capital ResourcesFinancing activities.



The
restrictions on either KB Impuls or VimpelCom-Region to repay debt may make it difficult for us to meet our debt service obligations. Although the risks related to our intercompany loans to KB Impuls and VimpelCom-Region will be eliminated if our
mergers with these subsidiaries are completed, we cannot assure you that we will be able to obtain all of the necessary approvals or meet all of the conditions precedent in order to complete these mergers.



Our revenues are often unpredictable and our revenue sources are short-term in nature.



Future revenues from our prepaid and contract
subscribers, our two primary sources of revenues, are unpredictable. We do not require our prepaid subscribers to enter into service contracts and cannot be certain that they will continue to use our services in the future. We require our contract
subscribers to enter into service contracts. However, many of our service contracts can be cancelled by the subscriber with limited advance notice and without significant penalty. Our churn rate, which is the number of subscribers disconnected from
our network within a given period expressed as a percentage of the midpoint of the number of subscribers at the beginning and end of that period, fluctuates significantly and is difficult to predict. Our churn rate was 39.3% in 2003, 30.8% in 2002
and 23.0% in 2001. The increase in our churn rate during 2003 was primarily the result of high subscriber growth and increased marketing competition. A large portion of our new subscribers are first time users of mobile telecommunications services
and first time users typically migrate between tariff plans and operators more often than established users of mobile telecommunications services. Migration of our subscribers between tariff plans is technically recorded as churn even though the
subscribers are retained, thereby contributing to the aggregate increase in the churn rate for these periods. The loss of a larger number of subscribers than anticipated could result in a loss of a significant amount of expected revenues. Because we
incur costs based on our expectations of future revenues, our failure to accurately predict revenues could put our business in jeopardy.



16



---

##### Table of Contents

Covenants in our debt agreements restrict our ability to borrow and invest, which could impair our ability to expand
or finance our future operations.



The loan agreement with
J.P. Morgan AG (funded by the issuance of loan participation notes by J.P. Morgan AG) and our credit facilities with Nordea and Bayerische and VimpelCom-Regions credit agreement with Svenska contain a number of different covenants that impose
significant operating and financial restrictions on us and VimpelCom-Region. Additional covenants are also included in KB Impulss vendor financing agreements with Alcatel, as well as in VimpelCom-Regions credit agreement with the Savings
Bank of the Russian Federation, or Sberbank, which will also apply to our company after the consummation of the VimpelCom-Region merger into VimpelCom. These restrictions significantly limit, and in some cases prohibit, among other things, the
ability of our company and certain of our subsidiaries to incur additional indebtedness, create liens on assets, enter into business combinations or engage in certain activities with companies within our group. A failure to comply with these
restrictions would constitute a default under the agreements discussed above and could trigger cross-default under some or all of the agreements discussed above. In the event of such a default, the debtors obligations under one or more of
these agreements could, under certain circumstances, become immediately due and payable, which would have a material adverse effect on our business and our shareholders equity.



We anticipate that we will need additional capital and may not be able to raise it.



Under our current business plan, we plan to raise up to US$600.0 million in
additional debt financing in the Russian and/or international capital markets and/or in bank financing to meet our projected capital requirements through 2005. We anticipate that we will need additional capital for a variety of reasons, such as:



| |  | financing our strategy to develop our regional GSM licenses, including possible acquisitions of existing operators or any payments required in connection with new licenses or
frequencies granted to us;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | improving our debt portfolio structure;
| | - | ---------------------------------------



| |  | financing new technologies, such as third generation, or 3G, services;
| | - | ----------------------------------------------------------------------



| |  | improving our infrastructure, including our information technology systems;
| | - | ---------------------------------------------------------------------------



| |  | financing our subscriber growth strategy;
| | - | -----------------------------------------



| |  | refinancing existing long-term indebtedness;
| | - | --------------------------------------------



| |  | enhancing our service and subscriber support;
| | - | ---------------------------------------------



| |  | responding to unexpected increases in the pace of network development;
| | - | ----------------------------------------------------------------------



| |  | complying with regulatory requirements or developments;
| | - | -------------------------------------------------------



| |  | taking advantage of new business opportunities; and
| | - | ---------------------------------------------------



| |  | implementing changes in our business strategy.
| | - | ----------------------------------------------



Due to a variety of factors, including perceived risks related to our regulatory developments, operational performance or deterioration in the Russian
economy or unfavorable conditions in the Russian or international capital markets, we may not be able to raise additional capital on acceptable terms. If we cannot obtain adequate financing on acceptable terms, we may be unable to take advantage of
opportunities, refinance existing long-term indebtedness or to meet unexpected financial requirements and our growth strategy may be negatively affected. This could cause us to delay or abandon anticipated expenditures or otherwise limit operations,
which could adversely affect our business.



If we invest in or acquire other
companies, we may face certain risks inherent in such transactions.



We may acquire or invest in other companies in business areas that are complementary to our current operations. Any such future acquisitions or investments could be significant and in any case would involve risks
inherent in assessing the value, strengths and weaknesses of such opportunities, as well as in integrating and



17



---

##### Table of Contents

managing their operations. Such acquisitions or investments may divert our resources and management time. We cannot assure you that any acquisition or
investment could be made in a timely manner or on terms and conditions acceptable to us. We also cannot assure you that we will be successful in completing and financing any such acquisition or investment.



Five out of our seven super-regional GSM licenses, including our GSM license for the
Moscow license area, will expire in 2008 and any failure on our part to extend existing licenses or procure new licenses to replace our existing licenses may have a material adverse affect on our business and results of operations.



Five out of our seven GSM licenses expire on April 28, 2008. We cannot
predict whether the licenses that expire in 2008 will be renewed after expiration. For instance, the New Law states that an application for a new license may be rejected if there are any uncured violations on the date of the renewal application, and
we cannot assure you that we will not have any uncured violations when we apply for license renewals. Furthermore, upon renewal our licenses may contain additional obligations, including payment obligations, or may cover reduced service areas. If
our GSM license for the Moscow license area and our other super-regional licenses that expire in 2008 are not renewed, our business could be materially adversely affected.



Our wireless licenses may not be extended or may be suspended or revoked, which could adversely affect our business.



We are required to meet certain terms and conditions to maintain each of our
GSM licenses. These conditions include:



| |  | commencing service by a certain date;
| | - | -------------------------------------



| |  | meeting certain line capacity and territorial or population coverage benchmarks by specified dates;
| | - | ---------------------------------------------------------------------------------------------------



| |  | providing telecommunications services only after obtaining permits for operation of equipment and use of frequencies; and/or
| | - | ----------------------------------------------------------------------------------------------------------------------------



| |  | developing coverage of particular cities by specified dates.
| | - | ------------------------------------------------------------



If we fail to meet start-of-service dates, line capacity, territorial or population coverage requirements or other technical requirements under any of our
GSM licenses, or do not obtain permits for operation of our equipment or use of frequencies, or if extensions requested are not granted and action is taken against our company or our subsidiaries, our business could be adversely affected. Each of
our GSM licenses also contains a requirement that the license be registered with the local regulatory authority (formerly the Department of Supervision over Communications and Informatization in the Russian Federation, or Gossvyaznadzor). The
authorities have not registered our license in Chechnya due to the fact that there is no regulator in that region.



Our GSM licenses covering the Central and Central Black Earth, North Caucasus, Siberian and Volga regions required us, among other things, to meet certain
coverage requirements for certain specified cities by December 31, 2001. However, we did not have all of the necessary base stations installed with all necessary permissions by December 31, 2001. The requirement in our regional GSM licenses that
certain networks cover specified cities by a specified date is a relatively new type of licensing requirement. Russian telecommunications legislation does not clearly define what coverage of a city means and does not clearly regulate the
construction and launching of GSM networks. As a result, there is a possibility that the Ministry of Transport and Communications (or any successor to the powers of the former Ministry of Communications) or the Federal Surveillance Service for
Communications may interpret the requirements differently than us and, consequently, we may be in violation of our regional GSM licenses despite our best efforts at compliance. In a non-binding clarification from the Ministry of Communications
issued in December 2001, the Ministry of Communications stated that this coverage requirement could be met by GSM-900 coverage, and that no minimum number of base stations need be installed to meet this requirement. Accordingly, it is our
understanding that so long as at least one base station is installed in each such city in the 900 MHz frequency range, the license requirement is met.



18



---

##### Table of Contents

We have installed at least one 900 MHz base station, based upon all necessary permissions that we are required to receive from various Russian government
agencies, in each of the cities indicated in each of our licenses except in Naberezhnye Chelny in the Volga license area and except for those cities in which the start-of-service date has been extended to December 31, 2004 (and we believe that the
dates by which the territorial coverage requirements must be met were also deemed to be extended as a result of the extension of the start-of service dates). We are currently in the registration stage of obtaining the necessary permissions for
Naberezhnye Chelny. We cannot assure you that the Ministry of Transport and Communications (or any successor to the powers of the former Ministry of Communications) or the Federal Surveillance Service for Communications will not find that we did not
fully meet our coverage requirements by December 31, 2001 in some or all cities.



Our GSM licenses covering the Northwest and Ural regions require us to meet certain coverage requirements (expressed as percentages of the population). Our license covering the Northwest region requires us to provide
coverage to 20.0%, 40.0% and 80.0% of the covered population by December 31, 2004, December 31, 2006 and December 31, 2011, respectively. Our license for the Ural region requires us to provide coverage to 30.0% and 70.0% of covered territorys
population by December 31, 2005 and December 2012, respectively. Additionally, our GSM licenses covering the Northwest and Ural regions each contain a start-of-service requirement for the area covered by each license. However, these start-of-service
requirements do not provide specific start-of-service dates for each administrative subject area covered by each license. In the past, we have interpreted such provisions to require us to install a network in at least one administrative subject area
covered by each license. Because we do not know whether the Federal Surveillance Service for Communications will interpret this start-of-service requirement in the same manner as its predecessor, we cannot assure you that it will not determine that
we have violated the start-of-service requirement if we do not start to provide service in each administrative subject within the license area by the start-of-service date specified in the license. If we fail to meet any of these coverage and
start-of-service requirements in our licenses, we anticipate that the Ministry of Transport and Communications (or any successor to the powers of the former Ministry of Communications) or the Federal Surveillance Service for Communications would
provide a warning to our company or our subsidiaries and provide us with an opportunity to cure any non-compliance. However, we cannot assure you that we will receive a grace period, and we cannot assure you that any grace period afforded to us
would be sufficient to allow us to cure any remaining non-compliance. In the event that we do not cure any remaining non-compliance, the Federal Surveillance Service for Communications could decide to suspend or terminate the entire license. The
occurrence of any of these events would adversely affect our ability to build out our networks in the regions in accordance with our business plan and could harm our reputation in the regions.



If we fail to completely fulfill the specific terms of any of our GSM
licenses, frequency permissions or other governmental permissions or if we provide services in a manner that violates applicable legislation, government regulators may levy fines, suspend or terminate our licenses, frequency permissions or other
governmental permissions. A suspension or termination of any of our GSM licenses could harm our business and our results of operations.



We face uncertainty regarding payments for frequency allocations under the terms of some of our licenses.



Historically, licensed wireless service providers in Russia received
frequency allocations at no cost. However, in June 1998, the government enacted a decree requiring wireless service providers to pay a fee for the use of radio frequency spectrum for a specified list of telecommunications services, which included
services that we provide. To date, we have not been charged significant fees for frequency allocations in our license areas, other than for a portion of our GSM-900 services in the Moscow license area and the Central and Central Black Earth license
area. However, we may be required to pay for additional frequency allocations in the future, which could negatively affect our financial results.



In August 1998, the government issued a decision according to which we had to pay US$30.0 million, initially due within 25 days, for the use of 15
frequency channels in connection with our receipt of permission to provide GSM-900 services in the Moscow license area and the Central and Central Black Earth license area.



19



---

##### Table of Contents

After an initial payment, the government issued a decision in September 1998 allowing us to pay the balance of the US$30.0 million in periodic installments.
Thereafter, we were instructed to pay the installments to different state bodies. We have now paid the full amount to accounts that were indicated by the Ministry of Defense, with the deduction of certain expenses incurred by our company in
connection with experimental works performed during the process of releasing frequency spectrum. We cannot assure you that we will not be required to pay for additional frequency channels that we use or need. The loss or suspension of any of our
frequency allocations could affect our ability to provide services and adversely affect our business.



We may soon face a shortage of federal telephone numbers that are currently available to us and our access to additional federal telephone numbers is limited.



Federal telephone numbers are an important feature of our mass market
strategy. Because we incur fewer costs in acquiring and providing service on federal numbers, we can offer service on federal numbers to price-sensitive subscribers. We submitted requests to the former Ministry of Communications to receive the right
to use the 906 area code for our GSM operations. However, because the former Ministry of Communications did not sign the order on the allocation of the 906 area code prior to January 1, 2004, the effective date for new legislation which provided
that the Russian Government should determine the procedure for allocation of numbering capacity, this area code will only be allocated after the Russian Government approves the allocation procedures and the use of the numbering reserves. It is
currently unclear when allocations procedures will be established and due to the reorganization of the Russian Government, establishment of allocation procedures may be delayed further. If we do not receive access to additional federal telephone
numbers soon, our ability to sign up new subscribers may be limited and, ultimately, our revenues and market share may be adversely affected.



Our ability to provide wireless services would be severely hampered if our access to local and long distance line capacity was limited or if the commercial terms of
our interconnect agreements were significantly altered.



Our ability to provide telecommunications services depends on our ability to secure and maintain interconnection agreements with Rostelecom and other incumbent owners of networks. Interconnection is required to complete calls that originate
on our respective networks but terminate outside our networks, or that originate from outside our networks and terminate on our networks. Each of our current interconnection agreements with incumbent operators may be terminated annually by the
respective operator. It is possible that in the future our interconnection agreements may not be renewed or not renewed on a timely basis or on commercially reasonable terms.



Further our ability to interconnect with the public switched telephone network and other local, domestic and international
networks, as well as directly with other cellular networks, in a cost-effective manner is critical to the economic viability of our operations. A significant increase in our interconnection costs or a lack of available line capacity for
interconnections could have an adverse effect on our ability to provide services. We anticipate that fixed line providers will significantly increase their interconnect costs in the near future as the public telephone networks begin to adjust their
fee structures in Russia to reflect operating costs, which, in turn, will increase our operating costs. We currently have numbering capacity agreements with a small number of telecommunications providers in Moscow, some of which are affiliated with
our main Moscow competitor, MTS. Additionally, we are contractually obligated to obtain the consent of certain of these companies to use local Moscow lines from other telecommunications providers.



We have interconnect agreements with Rostelecom, which transmits to our
subscribers all international traffic and a substantial portion of incoming traffic from the public switched network of Moscow, operated by the Moscow City Telephone Network, or MGTS. Recently, our subscribers have experienced difficulties receiving
calls from MGTS subscribers due to a shortage in the number of links between our network and Rostelecoms network. Although we have increased the number of available links with Rostelecom, these difficulties may persist. Currently, a portion of
the calls to or from our subscribers interconnects with MGTS through a recently



20



---

##### Table of Contents

installed switching center in Moscow. As the number of our subscribers increases and as our reliance on Rostelecom grows because we are required to
interconnect with it for all long distance traffic for our GSM operations, technical improvements and increased access to Rostelecoms exchanges and/or the exchanges of other telephone line capacity providers with whom we have interconnect
agreements may be required to ensure sufficient links are available for our subscribers. If Rostelecom or any other provider is unable to make required technical improvements, if the difficulties experienced by our subscribers with Rostelecoms
network recur or if any of our other telephone line capacity providers in Moscow become unreliable, we could experience serious interruptions in our ability to provide services. In addition, we will have to issue new telephone numbers to certain of
our subscribers who do not use federal numbers if one of our interconnect agreements is terminated and replaced by an interconnect agreement with an alternative provider.



We face uncertainty regarding our frequency allocations and may experience limited spectrum capacity for providing wireless services.



In order to commence our pilot operations in specific
cities in our GSM license areas, we applied for and received minimal frequency assignments in each of the cities in which we have commenced operations. As we build out our operations in the GSM license areas, we submit a frequency application and a
site plan to the appropriate bodies for approval. Based on the results of this study and the available frequency at that time, specific frequencies in specific areas in each of our GSM license areas may be allocated to us. However, there is a
limited amount of frequency available for wireless operators and in 2003 we applied for but did not receive additional GSM 900 frequencies. In addition, our application for GSM 900 frequencies in five territories within the Urals region, and six
territories in the Northwest region were denied. We cannot be certain that frequency will be allocated to us, that it will be allocated to us in a timely manner or that it will be adequate in terms of quantity and geographic coverage to allow us to
provide wireless services on a commercially feasible basis throughout all of our license areas.



If we fail to obtain renewals or extensions of our frequency allocations for our GSM networks, our business could be harmed.



Our frequency allocations for most of our license areas expire prior to the expiration date of our corresponding licenses.
We cannot predict whether we will be able to obtain extensions of our frequency allocations and whether extensions will be granted in a timely manner and without any significant additional costs. It is possible that there could be a re-allocation of
frequencies upon the expiration of existing permissions or the granting of frequency allocations for the same channels as our frequency allocations, requiring that we coordinate the use of our frequencies with the other license holders and/or
experience a loss of quality in our network.



If we fail to
obtain renewals or extensions of our frequency allocations for our GSM network in the Moscow license area, which expire on various dates between 2004 and 2008, or if other license holders are granted overlapping frequencies, our business could be
adversely affected. Depending on the growth of our business in our other license areas, the failure to obtain renewal or extension of any other frequency allocations could also adversely affect our business.



The frequency allocations for our GSM networks are limited in comparison to
the frequencies allocated to wireless service providers in other countries. The less frequency that is allocated to a wireless service provider, the fewer number of subscribers a network can handle. Our limited frequency allocations could cause us
to incur significant additional costs in building out our networks, interfere with our ability to provide wireless services and limit our growth, all of which might harm our business.



Failure to obtain all permits required to use frequencies or operate telecommunications equipment could result in a disruption of our
business.



Russian law prohibits operation of
telecommunications equipment without a relevant permit from the Federal Surveillance Service for Communications. Due to the rigorous regulatory framework in which we



21



---

##### Table of Contents

operate and the long periods of time required to obtain permissions from governmental bodies, it is often the case that we are not able to obtain all of the
permissions required for our operations in a timely manner. For example, although we received preliminary approvals for the receipt of certain frequency permissions in April 2001 and, in accordance with Russian law, we should have received the
frequency permissions by the end of April 2001, these permissions were only issued in September 2001. In addition, it is frequently not possible for us to procure all of the permissions for each of our base stations before we put the base stations
into commercial operation or to amend or maintain all of the permissions when we make changes to the location or technical specifications of our base stations. At times, there can be a significant number of base stations or other communications
facilities for which we do not have final permission to operate and there can be delays of several months until we obtain the final permissions for particular base stations or other communications facilities. If the Federal Surveillance Service for
Communications finds that we operate telecommunications equipment without an applicable permit, we could experience a significant disruption in our service or network operation and this would have a material adverse effect on our business and
results of operations.



It may be more difficult for us to attract new
subscribers in the regions outside of Moscow than it is for our competitors that established a local presence prior to the time that our company did.



We do not possess a first mover advantage in most of the regions outside of Moscow where we currently operate or intend to provide services in
the future. In many cases, we have been the second, third or fourth wireless operator to enter a particular regional market. For example, both MTS and MegaFon have had operations in the Northwest region, which includes St. Petersburg, before we did.
We launched commercial operations in St. Petersburg on April 15, 2003. In addition, both MTS and MegaFon currently hold GSM licenses in the Far East region, the only super-region in which we do not hold a license. We applied for but did not receive
a GSM license for the Far East region and were informed by the regulator that further tests would need to be conducted in order to determine whether additional GSM frequencies would be available in the Far East region. Therefore, we cannot assure
you that we will be able to gain access to operations in the Far East region at all or on commercially attractive terms by way of acquisition or by receipt of a new license. As a result, it may be more difficult for our company to attract new
subscribers in the regions than it is for our competitors (including MTS and MegaFon and their respective affiliates) that entered markets and established a local presence in some cases years before we did. The regions outside of Moscow are
significant to our company, MTS and MegaFon as the rate of subscriber growth in the regions has surpassed the subscriber growth rate in Moscow. If we are not successful in penetrating local markets outside of Moscow, our business may be adversely
affected.



We face competition from an increasing number of technologies and
may face greater competition as a result of the issuance of new wireless licenses.



The four principal competing wireless technologies currently licensed and operating in the Moscow license area are GSM-900/1800, operated by us, MTS and Sonic Duo, D-AMPS, operated by us, and a Nordic Mobile Telephone
network operating in the 450 MHz frequency range, or NMT-450, and Code Division Multiple Access, or CDMA, both of which are operated by MCC. GSM networks are operated in most regions in Russia. Competitors that are able to operate networks that are
more cost effective than ours may have competitive advantages over us, which could cause our business to suffer.



The Federal Surveillance Service for Communications may grant additional licenses for any or all of the wireless standards in the license areas in which
we operate, including GSM. In May 2001, the Ministry of Communications announced plans to issue GSM-1800 licenses to AMPS/D-AMPS operators in Russia and nearly all AMPS/D-AMPS operators have received GSM-1800 licenses and launched their networks
during 2003. The issuance of additional licenses for existing wireless standards or the implementation of new wireless technology in any of the license areas in which we operate could greatly increase competition and threaten our business.



We may also face competition from other communications
technologies. Providers of traditional wireline telephone service may compete with us as their services improve. Additionally, IP protocol telephony may



22



---

##### Table of Contents

provide competition for us in the future. The increased availability or marketing of these technologies could reduce our subscribers and adversely affect our
business.



Our failure to keep pace with technological changes and evolving
industry standards could harm our competitive position and, in turn, adversely affect our business.



The wireless telecommunications industry is characterized by rapidly changing technology and evolving industry standards. The rapid technological advances
in the wireless telecommunications industry make it difficult to predict the extent of future competition. It is possible that the technologies we utilize today will become obsolete or subject to competition from new technologies in the future for
which we may be unable to obtain the appropriate license. For example, 3G wireless standards, such as the Universal Mobile Telecommunications Services, or UMTS, standard, are significantly superior to existing second generation standards, such as
GSM. To date, no allocation procedures have been announced and no 3G licenses have been issued. The Ministry of Transport and Communications has stated that it expects to announce the allocation procedure for 3G licenses and to issue these licenses
by the end of 2004; however, such decisions have been delayed in the past.



Accordingly, our future success will depend, in part, on the adoption of a favorable policy and regulation of 3G standards, our ability to quickly identify the most promising technology and being the first licensee of
such technology. In this respect, among the most important challenges facing us are the need to:



| |  | effectively integrate new and leading technologies;
| | - | ---------------------------------------------------



| |  | continue to develop our technical expertise;
| | - | --------------------------------------------



| |  | influence emerging industry standards; and
| | - | ------------------------------------------



| |  | respond to other technological changes.
| | - | ---------------------------------------



We may not be able to meet all of these challenges in a timely and cost-effective manner. The press has reported that 3G licenses may be issued through
auctions rather than through tenders, and we believe that auctions generally create a higher price than tenders for licenses. In addition, we may not be able to acquire licenses for 3G wireless standards, which we may deem necessary to compete, we
may not be able to acquire such licenses on reasonable terms and we may not be able to develop a strategy compatible with this or any other new technology. In 2003 we applied for permits to use radio frequencies in order to expand our UMTS test
network in Moscow. The former Ministry of Communications did not respond to our permit requests before its reorganization. Our business may be adversely affected if we do not acquire licenses for 3G wireless standards, acquire 3G wireless licenses
on commercially favorable terms or if we experience delays in building and developing our 3G network.



Our strategic partnerships and joint ventures to develop our services in the regions in Russia are accompanied by inherent business risks.



We benefit significantly from the strengths and expertise of our strategic partners, Telenor East Invest AS, or Telenor, and
Eco Telecom Limited, part of the Alfa Group of companies, or the Alfa Group. In May 2001, we signed a series of agreements with Alfa Group and Telenor to develop our regional license areas outside of Moscow. In November 2001, Alfa Group invested
US$103.0 million in our company, which we contributed (together with an additional US$15.6 million of our own funds, at the exchange rate as of the date of contribution) as equity to VimpelCom-Region. In November 2002, Alfa Group, Telenor and our
company each invested US$58.5 million each in VimpelCom-Region and in August 2003, Alfa Group invested US$58.5 million in VimpelCom-Region.



Since that time, Alfa Group has acquired a stake in MegaFon, one of our main competitors. Alfa Group has confirmed that following its acquisition of a
stake in MegaFon our company continues to be its primary investment vehicle in the Russian telecommunications industry. However, if Alfa Groups investment focus



23



---

##### Table of Contents

shifts in favor of MegaFon, our company may be deprived of the important benefits and resources that it derives from Alfa Groups current
telecommunications investment policy. Additionally, a shift in Alfa Groups focus in favor of MegaFon may hinder our activities and operations and may prevent our further national expansion.



We may enter into strategic partnerships and joint ventures with other
companies in the future to develop other aspects of our business including our GSM operations outside the Moscow license area. Emerging market strategic partnerships and joint ventures are often accompanied by risks, including:



| |  | the possibility that a strategic or joint venture partner or partners will default in connection with a capital contribution or other obligation, thereby forcing us to fulfill the
obligation;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the possibility that a strategic or joint venture partner will hinder development by blocking capital increases if that partner runs out of money or loses interest in pursuing the
partnership or joint projects;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | diversion of resources and management time;
| | - | -------------------------------------------



| |  | potential joint and several or secondary liability for transactions and liabilities of the partnership or joint venture entity; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------



| |  | the difficulty of maintaining uniform standards, controls, procedures and policies.
| | - | -----------------------------------------------------------------------------------



Telenor and Alfa Group may have different strategies in pursuing regional development, development in the CIS or in other
regions than we do, and they may have different strategies from one another. We cannot assure you that conflicts of interest among our company, Alfa Group and Telenor will not arise. Any such conflict of interests may affect our ability to service
or repay our debt obligations.



We may encounter difficulties in expanding
and operating our networks.



Increasing the capacity of
our networks in the Moscow license area and the regions and expanding the geographic coverage of our networks into our regional license areas are important components of our plan to increase our subscriber base. We may encounter difficulties in
building our networks or face other factors beyond our control that could affect the quality of services, increase the cost of construction or operation of our networks or delay the introduction of services. As a result, we could experience
difficulty in increasing our subscriber base or could fail to meet license requirements, either of which may have an adverse effect on our business. We may encounter difficulties with respect to:



| |  | obtaining in a timely manner and maintaining licenses, frequency allocations, other governmental permissions and numbering capacity sufficient to provide services to our
subscribers;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | obtaining sufficient interconnect arrangements, including federal telephone numbers for our subscribers;
| | - | --------------------------------------------------------------------------------------------------------



| |  | delivering services that are technically and economically feasible;
| | - | -------------------------------------------------------------------



| |  | financing increases in network construction and development costs, including in the regions;
| | - | --------------------------------------------------------------------------------------------



| |  | providing service coverage to a large geographic area outside the Moscow license area;
| | - | --------------------------------------------------------------------------------------



| |  | obtaining compliance certificates for our telecommunications equipment in a timely and cost-efficient manner;
| | - | -------------------------------------------------------------------------------------------------------------



| |  | marketing our services in a large geographic area to a new potential subscriber base outside the Moscow license area with lower average income;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  | meeting demands of local special interest groups; and
| | - | -----------------------------------------------------



| |  | obtaining adequate supplies of network equipment and handsets.
| | - | --------------------------------------------------------------



24



---

##### Table of Contents

We have experienced substantial growth and development in a relatively short period of time



We have experienced substantial growth and development in a relatively short
period of time. Management of this growth has required significant managerial and operational resources and is likely to continue to do so. Management of growth will require, among other things:



| |  | stringent control of network build-out and other costs;
| | - | -------------------------------------------------------



| |  | continued development of financial and management controls and information technology systems and their implementation in newly acquired businesses;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  | implementation of adequate internal controls and disclosure controls and procedures;
| | - | ------------------------------------------------------------------------------------



| |  | increased marketing activities;
| | - | -------------------------------



| |  | the need to provide additional service centers;
| | - | -----------------------------------------------



| |  | hiring and training of new personnel;
| | - | -------------------------------------



| |  | coordination among our logistical, technical, accounting, finance, marketing and sales personnel; and
| | - | -----------------------------------------------------------------------------------------------------



| |  | the ability to integrate new acquisitions into our operations.
| | - | --------------------------------------------------------------



Our failure to successfully manage our growth needs could have a material adverse effect on our business, operating performance and financial condition.



The limited history of wireless telecommunications in our regional license
areas in Russia and our limited operating history in GSM in the regions create additional business risks, which could have an adverse affect on our business.



Wireless telecommunications are relatively new in the Russian regions, which have experienced slower economic growth over
the past decade than Moscow. As the wireless telecommunications industry develops in our regional license areas, changes in market conditions could make the development of some regional license areas less or no longer commercially feasible. A
reduction in our viable development opportunities could have an adverse effect on our business.



In addition, we have a limited operating history providing GSM services in the regions. Consequently, we are subject to the risks associated with entering
into any new product line. Our failure to properly manage those risks, including those risks specified below, could have an adverse effect on our business:



| |  | unrealistic expectations about our operational ability and our ability to meet license and other regulatory requirements;
| | - | -------------------------------------------------------------------------------------------------------------------------



| |  | unrealistic expectations about our ability to obtain in a timely manner and maintain licenses, frequency allocations and other governmental permissions sufficient to provide
services to our subscribers;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | unexpected difficulties in executing our business plan;
| | - | -------------------------------------------------------



| |  | inaccurate assumptions about market size, characteristics and conditions; and
| | - | -----------------------------------------------------------------------------



| |  | delays in reacting to changing market conditions.
| | - | -------------------------------------------------



We cannot assure you that a market for our future services will develop or that we can satisfy subscriber expectations, which could result in a significant loss of our
subscriber base.



We currently offer our subscribers a
number of value added services, including voice mail, SMS, call forwarding, wireless Internet access and data transmission services. Despite investing significant resources in marketing, we may not be successful in creating or competing in a market
for these value added services. In particular, we cannot assure you that we can:



| |  | enhance our current services;
| | - | -----------------------------



25



---

##### Table of Contents

| |  | develop new services that meet changing subscriber needs;
| | - | ---------------------------------------------------------



| |  | generate significant demand for our new services through successful advertising and marketing initiatives;
| | - | ----------------------------------------------------------------------------------------------------------



| |  | satisfy subscriber expectations with respect to value added services;
| | - | ---------------------------------------------------------------------



| |  | compete against lower service rates charged by our competitors;
| | - | ---------------------------------------------------------------



| |  | provide our new services in a profitable manner; and
| | - | ----------------------------------------------------



| |  | continue to offer value added services in the event of adverse changes in economic conditions.
| | - | ----------------------------------------------------------------------------------------------



If we fail to obtain widespread commercial and public acceptance of our new services, our visibility in the Russian
telecommunications market could be jeopardized, which could result in a significant loss of our subscriber base. We cannot assure you that subscribers will continue to utilize the services we offer.



We depend heavily on our senior management and key technical personnel and, because of our
rapid growth and expansion, we may have difficulty attracting and retaining qualified professionals to manage our growth.



Our future operating results depend in large part upon the continued contributions of key senior managers and technical personnel. We cannot be sure that
their services will continue to be available to us in the future, nor do we have key personnel life insurance covering any of our senior managers. Our current CEO and General Director, Alexander Izosimov, assumed his duties in October 2003 and is
under contract with our company for three years. We could be adversely affected if Mr. Izosimov or any of our other senior managers ceased to actively participate in the management of our business, whether upon the expiration of their contracts or
earlier.



In addition, our rapid growth over a short period of
time has significantly strained our managerial and operational resources and is likely to continue to do so. Our personnel, systems, procedures and controls may be inadequate to support our future operations. To successfully manage our growth and
development, we will depend in large part upon our ability to attract, train, retain and motivate highly skilled employees and management. However, because of the rapid growth of the telecommunications market, there is significant competition for
employees who have experience in technology, telecommunications infrastructure and programming. In the future, it may be increasingly difficult for us to hire qualified personnel. Further, we may lose some of our most talented personnel to our
competitors. If we cannot attract, train, retain and motivate qualified personnel, then we may be unable to successfully manage our growth or otherwise compete effectively in the Russian mobile telecommunications industry, which could adversely
affect our business.



Our business could be adversely affected if we fail to
implement the necessary operating systems to support our growth.



Our ability to manage our business successfully is contingent upon our ability to implement sufficient operational resources and systems to support our rapid growth. We may face risks in rolling out systems in the regions or integrating new
technologies into existing systems. For example, if our new billing system develops unexpected limitations or problems, subscriber bills may not be generated promptly and correctly. This could adversely impact our business since we would not be able
to collect promptly on subscriber balances. In addition, our current management information system is significantly less developed in certain respects than those of wireless service providers in more developed markets and may not provide our
management with as much or as accurate information as in those more developed markets. Failure to obtain the necessary operating systems to support our growth could have a materially adverse effect on our business.



26



---

##### Table of Contents

We could experience subscriber database piracy, which may adversely affect our reputation, lead to subscriber
lawsuits, loss of subscribers or hinder our ability to gain new subscribers and thereby adversely affect our business.



We may be exposed to database piracy which could result in the unauthorized dissemination of information about our subscribers, including their names,
addresses, home phone numbers, passport details and individual tax numbers. In 2003, certain subscriber databases of MTS, MegaFon, Delta Telecom and other operators were stolen, copied and made available for sale. The breach of security of our
database and illegal sale of our subscribers personal information could adversely impact our reputation, prompt lawsuits against us by individual and corporate subscribers, lead to a loss in subscribers and hinder our ability to attract new
subscribers. Each of these factors, individually or in the aggregate, could negatively impact our revenues and results of operations.



We could lose network and telecommunications equipment if there is an event of default under agreements related to our secured debt.



Our financing agreements with Sberbank, Alcatel, Nordea and Bayerische and
Svenska are secured by pledges over certain network, telecommunications and office equipment, securities and real property. If a default, including a cross-default, occurs under any of these agreements, our counterparties may foreclose on, among
other things, the pledged network or telecommunications equipment or the real property where such equipment is located. If we lose network or telecommunications equipment following such an event of default, our business could be materially adversely
affected.



We are subject to anti-monopoly regulation, which could restrict
our business.



Russias anti-monopoly regulator has
oversight over consumer affairs and advertising and may initiate an investigation on its own initiative or upon the request of a consumer or other body. We have received notices from the anti-monopoly regulator alleging violations of consumer rights
and advertising regulations in the past and are currently in the process of resolving certain issues raised by the regulator regarding, for instance, our advertising of certain promotions. Some of the claims alleged by the anti-monopoly regulator
regarding our advertising campaigns and violations of consumer rights have also been raised by subscribers in civil suits recently filed against us. Regulatory measures taken in response to violations may include the requirement to discontinue
certain advertisements, or the imposition of fines, tariffs or restrictions on acquisitions or on other activities, such as contractual obligations.



Russias anti-monopoly regulator also is authorized to regulate Russian companies deemed to be a dominant force in, or a monopolist of, a market.
Because Russian law does not clearly define market in terms of either services provided or geographic area of activity, it is difficult to determine under what circumstances we could be subject to these or similar measures. We cannot
exclude the possibility, however, that our current subscriber market share in the Moscow license area or certain regions could trigger close scrutiny by the anti-monopoly regulator of the pricing and other terms of our services. We could be subject
to anti-monopoly regulation in the future, which could adversely affect our business and our growth strategy.



The concepts of affiliated persons and group of persons that are fundamental to the Russian anti-monopoly law and to the law on
joint stock companies are not clearly defined and are subject to many different interpretations. Consequently, the Russian anti-monopoly regulator or other competent authorities may challenge the positions we or certain of our officers, directors or
shareholders have taken in this respect despite our best efforts at compliance. Any successful challenge by the Russian anti-monopoly regulator or other competent authorities may expose us or certain of our officers, directors or shareholders to
fines or penalties and may result in the invalidation of certain agreements or arrangements. This may adversely affect the manner in which we manage and operate certain aspects of our business.



27



---

##### Table of Contents

Our business could be adversely affected if our handset and network equipment supply arrangements are terminated or
interrupted.



The successful build-out and operation of
our networks depend heavily on obtaining adequate supplies of switching equipment, base stations, other network equipment and telephone handsets on a timely basis. We currently purchase our GSM network equipment from a small number of suppliers,
principally Alcatel and Ericsson, although some of the equipment that we use is available from other suppliers. From time to time, we have experienced delays receiving equipment in the regions. Our business could be adversely affected if we are
unable to obtain adequate supplies or equipment from Alcatel, Ericsson, Nokia or another supplier in a timely manner and on reasonable terms.



Our network equipment and systems may be subject to disruption and failure, which could cause us to lose subscribers and violate our licenses.



Our business depends on providing subscribers with reliability, capacity and
security. As mobile phones increase in technological capacity, they may become increasingly subject to computer viruses and other disruptions. These viruses can replicate and distribute themselves throughout a network system. This slows the network
through the unusually high volume of messages sent across the network and affects data stored in individual handsets. Although, to date, most computer viruses have targeted computer networks, mobile phone networks are also at risk. We cannot be sure
that our network system will not be the target of a virus or, if it is, that we will be able to maintain the integrity of the data in individual handsets of our subscribers or that a virus will not overload our network, causing significant harm to
our operations. In addition to computer viruses, the services we provide may be subject to disruptions resulting from numerous factors, including:



| |  | human error;
| | - | ------------



| |  | physical or electronic security breaches;
| | - | -----------------------------------------



| |  | power loss;
| | - | -----------



| |  | hardware and software defects;
| | - | ------------------------------



| |  | capacity limitations;
| | - | ---------------------



| |  | fire, earthquake, flood and other natural disasters; and
| | - | --------------------------------------------------------



| |  | sabotage, acts of terrorism and vandalism.
| | - | ------------------------------------------



Problems with our switches, controllers, fiber optic network or at one or more of our base stations, whether or not within our control, could result in
service interruptions or significant damage to our networks. Although we have back-up capacity for our network management operations and maintenance systems, automatic transfer to our back-up capacity is not seamless, and may cause network service
interruptions. In the first half of 2001, we experienced a number of network service interruptions, primarily due to software-related problems. These interruptions affected a minority of our subscribers and lasted an average of less than one hour.
In the second half of 2001, we experienced a three hour network interruption that affected approximately 50.0% of our subscribers in the Moscow license area, primarily due to software-related problems. In 2002, we suffered several technical service
interruptions, including a network service interruption in March 2002 in the course of implementing our new billing system. This service interruption affected approximately 49,000 of our most loyal contract subscribers and, for some of these
subscribers, lasted for up to three days. In 2003, we had a two and half hour service interruption relating to software modifications that affected 60.0% of our subscribers in the Moscow license area. According to media reports, such service
interruptions may occur from time to time during installations of new software. Any further interruption of services could harm our business reputation and reduce the confidence of our subscribers and consequently impair our ability to obtain and
retain subscribers and could lead to a violation of the terms of our licenses, each of which could adversely affect our business. We do not carry business interruption insurance to prevent against network disruptions.



28



---

##### Table of Contents

Allegations of health risks related to the use of wireless telephones could have an adverse effect on us.



There have been allegations that the use of certain
portable wireless telecommunications devices may cause serious health risks. The Cellular Telecommunications Industry Association in the United States has researched these potential health risks and publicly announced its belief that no risk exists.
Nonetheless, the actual or perceived health risks of wireless telecommunications devices could diminish subscriber growth, reduce network usage per subscriber, spark product liability lawsuits or limit available financing. Each of these
possibilities has the potential to cause adverse consequences for us and for the entire wireless telecommunications industry.



Because no standard definition of a subscriber exists in the mobile telecommunications industry, comparisons between subscriber data of different companies may be
difficult to draw.



The methodology for calculation of
subscriber numbers varies substantially in the mobile telecommunications industry, resulting in variances in reported subscriber numbers from that which would result from the use of a single methodology. Therefore, it may be difficult to draw
comparisons of subscriber numbers and churn between different mobile cellular communications companies.



Our intellectual property rights are costly and difficult to protect, and we cannot guarantee that the steps we have taken to protect our property rights will be adequate.



We regard our copyrights, trademarks, trade dress, trade secrets, and
similar intellectual property, including our rights to certain domain names, as important to our continued success. We rely upon trademark and copyright law, trade secret protection and confidentiality or license agreements with our employees,
customers, partners and others to protect our proprietary rights. Still, intellectual property rights are especially difficult to protect in the markets where we operate. In these markets, the regulatory agencies charged to protect intellectual
property rights are inadequately funded, legislation is underdeveloped, piracy is commonplace and enforcement of court decisions is difficult.



In addition, litigation may be necessary to enforce our intellectual property rights, to determine the validity and scope of the proprietary rights of
others or to defend against claims of infringement. Any such litigation may result in substantial costs and diversion of resources, and, if decided unfavorably to us, could have a material adverse effect on our business or results of operations. We
also may incur substantial acquisition or settlement costs where doing so would strengthen or expand our intellectual property rights or limit our exposure to intellectual property claims of third parties. While we have successfully enforced our
property rights in courts in the past, we cannot assure you that we will be able to successfully protect our property rights in the future.



Risks Related to Business Operations in Emerging Markets



Investors in emerging markets, such as Russia, are subject to greater risks than more developed markets, including significant political, legal and economic risks and
risks related to fluctuations in the global economy.



Investors in emerging markets, such as Russia, should be aware that these markets are subject to greater risks than more developed markets, including in some cases significant political, legal and economic risks. Emerging market governments
and judiciaries often exercise broad, unchecked discretion and are susceptible to abuse and corruption. In Russia, for instance, certain companies, including our company, have recently been subjected to attacks by those who try to exploit the
deficiencies in the Russian legal and political system. Emerging economies, such as the Russian economy, are subject to rapid change and the information set out herein may become outdated relatively quickly. Russias economy, like other
emerging economies, is vulnerable to market downturns and economic slowdowns elsewhere in the world. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in Russia or other emerging
economies



29



---

##### Table of Contents

could dampen foreign investment in Russia and adversely affect the Russian economy. These developments could severely limit our access to capital and could
adversely affect the purchasing power of our subscribers and, consequently, our business. Investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is
appropriate.



Risks Related to the Political Environment in
Russia



If reform policies in Russia are reversed, our business could be
harmed and it could restrict our ability to obtain financing.



Under President Putin, the political and economic situation in Russia has become more stable, creating better conditions for economic growth. However, there is growing sentiment in Russia against certain private enterprises that is being
encouraged by a number of prominent Duma deputies, political analysts and members of the media. While President Putin has maintained stability and policies generally oriented towards the continuation of economic reforms, changes in government, major
policy shifts or a lack of consensus between various influential political groups could disrupt or reverse economic and regulatory reforms. In addition, reforms may be hindered if conflicts of interest are permitted to exist when officials are also
engaged in private business, particularly when the business interests are in the industry which the officials regulate. Notwithstanding initiatives to combat corruption, Russia, like many other markets, continues to experience corruption and
conflicts of interests of officials which add to the uncertainties we face, and may increase our costs. Any deterioration of Russias investment climate could restrict our ability to obtain financing in the future in international capital
markets and our business could be harmed if governmental instability recurs or if reform policies are reversed.



On March 9, 2004, President Putin issued a presidential decree to substantially reorganize the cabinet, federal ministries and other parts of the
executive branch of government. As part of the reorganization, the Ministry of Communications, Gossvyaznadzor, and other related regulatory bodies were replaced by the Ministry of Transport and Communications, the Federal Surveillance Service for
Communications and the Federal Communications Agency. As required by the presidential decree, on April 6, 2004 the Russian government adopted regulations to divide certain authorities and responsibilities among the reorganized entities. The Ministry
of Transport and Communications is responsible for the Federal Surveillance Service for Communications and the Federal Communications Agency and the issuance of decrees that regulate the Russian telecommunications industry. The Federal Surveillance
Service for Communications is responsible for maintaining control in the communications area and for the issuance of communications licenses, while the Federal Communications Agency is responsible for the issuance, control and use of radio frequency
allocations. Although the regulations have been adopted, there is currently no comprehensive regulatory framework with respect to these new regulatory bodies. As a result, it is unclear how these new bodies will function and what effect the
reorganization will have on the telecommunications industry.



Risks Related to the Economic Situation in Russia



Economic
instability in Russia could adversely affect our business.



Since the end of communism in the early 1990s, Russias economy has been undergoing a rapid transformation from a one-party state with a centrally planned economy to a pluralist democracy with a market oriented economy. This
transformation has been marked by periods of significant instability. In particular, in August 1998, the Russian government decided to temporarily stop supporting the ruble, causing the currency to collapse, defaulted on much of its short-term
domestic debt and imposed a ninety-day moratorium on foreign debt payments by Russian companies. The Russian government subsequently entered into protracted negotiations with its creditors to reschedule the terms of its domestic and foreign debt. It
is possible that Russia may default



30



---

##### Table of Contents

on its domestic or foreign debt in the future or take other actions that could adversely affect its financial stability. Operating in such an economic
environment makes it more difficult for us to obtain and maintain credit facilities, access international or domestic capital markets and obtain other financing to satisfy our future capital needs.



The August 1998 financial crisis marked the beginning of an economic downturn
that affected the entire Russian economy and resulted in Russias equity market being the worst-performing equity market in the world in 1998. There can be no assurance that recent positive trends in the Russian economy, such as the increase in
the gross domestic product, a relatively stable ruble and a reduced rate of inflation, will continue or will not reverse abruptly. Moreover, the Russian economy has benefited from high oil prices and fluctuations in international oil prices could
adversely affect Russias economy. Future downturns in the Russian economy are possible and could diminish demand for our services, our ability to retain existing subscribers and collect payments from them and could prevent us from executing
our growth strategy. Future downturns in the Russian economy could also prevent us from obtaining financing needed to fund our expansion, which could cause our business to suffer.



Russias physical infrastructure is in very poor condition and further deterioration in the physical infrastructure could have a
material adverse effect on our business.



Russias
physical infrastructure largely dates back to Soviet times and has not been adequately funded and maintained in recent years. Particularly affected are the rail and road networks, power generation and transmission, communications systems, and
building stock. The federal government is actively considering plans to reorganize the nations rail, electricity and telephone systems, as well as the public utilities. Any such reorganization may result in increased charges and tariffs,
potentially adding costs to our business, while failing to generate the anticipated capital investment needed to repair, maintain and improve these systems. The deterioration of Russias physical infrastructure harms the national economy,
disrupts the transportation of goods and supplies, adds costs to doing business in Russia and can interrupt business operations. These difficulties can impact us directly; for example, we have needed to keep portable electrical generators available
to help us maintain base station operations in the event of power failures. Further deterioration in the physical infrastructure could have a material adverse effect on our business.



We are only able to conduct banking transactions with a limited number of creditworthy Russian banks as the Russian banking system
remains underdeveloped.



Russias banking and other
financial systems are not well developed or regulated and Russian legislation relating to banks and bank accounts is subject to varying interpretations and inconsistent applications. There are currently a limited number of creditworthy Russian banks
with which our company can conduct banking transactions. Most creditworthy Russian banks are located in Moscow and there are fewer creditworthy Russian banks in the regions outside of Moscow. We have received credit lines from Sberbank, which
require us to maintain certain turnovers through accounts at Sberbank. We have tried to reduce our risk by receiving and holding funds in a number of Russian banks, including Sberbank, subsidiaries of foreign banks and Alfa Bank, an affiliate of one
of our strategic shareholders. However, our ability to reduce bank risk in this manner is limited due to the small number of creditworthy banks operating outside of Moscow. A prolonged or serious banking crisis or the bankruptcy of a number of banks
in which we receive or hold our funds could adversely affect our business and our ability to complete banking transactions in Russia.



Fluctuations in the value of the ruble against the U.S. dollar or the Euro could materially adversely affect our financial condition and results of operations.



Most of our costs, expenditures and liabilities, are
either denominated in, or are closely linked to, foreign currencies, primarily the U.S. dollar and the Euro, including capital expenditures, borrowings, interconnection fees and salaries. As a result, devaluation of the ruble against such foreign
currencies, in particular the U.S. dollar, can adversely affect us by increasing our costs in ruble terms. Although we link our tariffs, which are



31



---

##### Table of Contents

payable in rubles, to the U.S. dollar, the effectiveness of this hedge is limited because we cannot always increase our tariffs in line with ruble
devaluation due to competitive pressures, leading to a loss of revenues in U.S. dollar terms. Furthermore, we are required to collect revenues from our subscribers and from other Russian telecommunications operators for interconnect charges in
rubles, and there may be limits on our ability to convert these rubles into foreign currency. We have had difficulty buying U.S. dollars in Russia in the past, and we cannot be certain that a market for converting rubles into foreign currency will
continue to exist in the future. To the extent permitted by Russian law, we hold our readily available cash in U.S. dollars and Euros in order to manage against the risk of ruble devaluation. If the U.S. dollar value of the ruble declines, we could
have difficulty repaying or refinancing our foreign currency denominated indebtedness. The devaluation of the ruble also results in losses in the value of ruble-denominated assets, such as rubles held in local bank accounts. An increase in the U.S.
dollar-value of the ruble could, unless effectively hedged, result in a net foreign exchange loss. In turn, our net income could decrease. Accordingly, fluctuation in the value of the ruble against the U.S. dollar or the Euro could materially
adversely affect our financial condition and results of operations.



Sustained periods of high inflation may adversely affect our business.



Russia has experienced high levels of inflation since the early 1990s. Inflation increased dramatically following the August 1998 financial crisis, reaching a rate of 84.4% in 1998. Notwithstanding recent reductions
in the ruble inflation rate, which in 2003 was as low as 12.0%, inflationary pressure on the ruble remains significant. Although our tariffs are linked to the U.S. dollar, our operating results could suffer if we are unable to sufficiently increase
our prices to offset increased inflation, which may become more difficult as we attract more mass market subscribers and our subscriber base becomes more price sensitive.



Information that we have obtained from the Russian government and other sources may be unreliable.



The official data published by the Russian government is substantially less
complete and less reliable than similar data in the United States and Western Europe. We cannot be certain that the information that we obtained from the Russian government and other sources and included in this document is reliable. When reading
this Annual Report on Form 20-F, you should keep in mind that the Russian data and statistics that we have included could be incomplete or erroneous. In addition, because there are no current and reliable official data regarding the Russian wireless
telecommunications market, including our competitors, we have relied, without independent verification, on certain publicly available information. This includes press releases and filings under the U.S. securities laws, as well as information from
various private publications, some or all of which could be based on estimates or unreliable sources.



Risks Related to the Social Environment in Russia



Social instability in Russia could lead to increased support for centralized authority and a rise in nationalism, which could harm our business.



Social instability in Russia, coupled with difficult economic conditions, could lead to increased support for centralized
authority and a rise in nationalism. These sentiments could lead to restrictions on foreign ownership of Russian companies in the telecommunications industry or large-scale nationalization or expropriation of foreign-owned assets or businesses. We
do not anticipate the nationalization or expropriation of our assets because neither we nor any of our subsidiaries were created as a result of privatization of any state enterprise. However, there is not a great deal of experience in enforcing
legislation enacted to protect private property against nationalization and expropriation. As a result, we may not be able to obtain proper redress in the courts, and we may not receive adequate compensation if in the future the Russian government
decides to nationalize or expropriate some or all of our assets. If this occurs, our business could be harmed.



32



---

##### Table of Contents

In addition, ethnic, religious, historical and other divisions have, on occasion, given rise to tensions
and, in certain cases, military conflict. Russian military and paramilitary forces have been engaged in Chechnya in the recent past and continue to maintain a presence there. In addition, groups allegedly associated with the Chechen opposition have
committed various acts of terrorism in population centers in Russia, resulting in significant loss of life, injury and damage to property. The spread of violence, or its intensification, could have significant political consequences, including the
imposition of a state of emergency in some parts or throughout the Russian Federation. These events could materially and adversely affect the investment environment in Russia.



Risks Related to the Legal and Regulatory Environment in Russia



We operate in an uncertain regulatory environment, which could cause our operations to
become more complicated, burdensome and expensive and at times results in our operating without all of the required permissions.



There is currently no comprehensive legal framework with respect to the provision of telecommunications services in Russia. On January 1, 2004, the new
Law On Communications came into effect. Many of the implementing regulations required in connection with the New Law have not yet been adopted. In addition, the Ministry of Communications was reorganized into the Ministry of Transport
and Communications and the other bodies responsible for regulating the telecommunications sector were also reorganized. Many of the regulations setting forth the structure and authority of these bodies have not yet been adopted. For instance, the
licensing procedures (including the reissuance of licenses, frequencies and other permissions in connection with mergers) under the New Law appear to differ from the procedures under prior law and do not clearly state the procedures to be followed
to obtain new licenses, frequencies, numbering capacity or other permissions needed to operate our business, and do not clearly specify the consequences for violations of the foregoing.



As a result of the uncertainty in the regulatory environment we could experience:



| |  | difficulties having our licenses, frequencies and permissions reissued or new licenses, frequencies and permissions issued in connection with our mergers with VimpelCom-Region and
KB Impuls;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | restrictions or delays in receiving new licenses and frequencies, receiving regulatory approvals for rolling out our networks in the regions for which we have licenses, obtaining
additional numbering capacity and importing and certifying our equipment;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | difficulty in complying with applicable legislation and the terms of any notices or warnings received from the regulatory authorities in a timely manner;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | significant additional costs;
| | - | -----------------------------



| |  | delays in implementing our operating or business plans; and
| | - | -----------------------------------------------------------



| |  | increased competition.
| | - | ----------------------



The New Law imposes new levies and fees on telecommunications operators, in addition to fees previously imposed by the former Ministry of Communications, that may have a material adverse effect on our financial
condition.



The New Law adversely affects the activities
of our company and all other telecommunications operators in Russia by imposing additional financial burdens on them. Charges for interconnection with Svyazinvests network are likely to increase in order to provide additional funds for the
development and modernization of the Svyazinvest network. Since the tariffs for interconnection and transfer of traffic have not yet been adopted, at present it is difficult to assess the actual volume of this additional financial burden. Another
additional financial burden on all operators will be the compulsory payments to the universal services fund. The New Law contemplates that this new fund will be formed from compulsory non-tax levies on all telecommunications operators in
order to compensate for the losses of the operators designated universal service providers. Although



33



---

##### Table of Contents

the actual rate of such levies is yet to be declared, it is widely expected that it will be set at around 3.0% of each operators revenues, which will
adversely affect the financial performance of Russian telecommunications operators, including our company. Additionally, the New Law provides for payments for numbering capacity allocation, including through auctions in instances where numbering
capacity is scarce. Because telecommunications operators apply for numbering allocation on a regular basis, the new payment requirement may have a materially adverse affect on the financial condition of operators.



The New Law also endorses the existing practice of collecting special levies
for financing the state supervisory body in the telecommunications sector. The law contemplates that these levies will be transferred through the federal budget, but their collection and distribution will be recorded as a separate new item of the
budget, which will lead to statutory endorsement of this separate non-tax levy on telecommunication operators. The imposition of such levies could materially increase our costs.



In addition to these new levies, the Russian telecommunications regulators may impose additional levies on cellular
operators from time to time. For example in November 2001, the Russian government approved a program to transfer the frequencies used by air traffic control systems in order to make them available to cellular operators and it is possible that
cellular operators may be required to contribute to the cost of frequency conversion. Additionally, since January 2001, we have been required to pay fees, calculated as a portion of our revenues for services provided in each region, to the former
Ministry of Communications on a monthly basis. This fee was unilaterally imposed by the former Ministry of Communications in April 2001 by amendments to each of our GSM licenses for the Moscow license area, the Central and Central Black Earth, North
Caucasus, Siberian and Volga regions and our Moscow D-AMPS license. The GSM licenses that we obtained in 2002 covering the Northwest and Ural regions are also subject to these fees. In accordance with the terms of our licenses the amount of this fee
is 0.3% of revenues earned under our licenses (calculated in rubles and in accordance with applicable Russian tax laws). We may in the future be required to pay additional such fees or fees for services from other regions.



Unlawful or arbitrary action by the regulatory authorities may have an adverse affect on
our business.



Regulatory authorities have a high degree
of discretion in Russia and at times exercise their discretion arbitrarily, without hearing or prior notice, and sometimes in a manner that is contrary to law. Unlawful or arbitrary actions have included unscheduled inspections by regulators,
suspension or withdrawal of licenses and permissions, unexpected tax audits, criminal prosecutions and civil actions. Unlawful or arbitrary regulatory action directed at us could have a material adverse effect on our business.



If we are found not to be in compliance with applicable telecommunications laws or
regulations, we could be exposed to additional costs or suspension or termination of our licenses, which might adversely affect our business.



We cannot assure you that regulators, judicial authorities or third parties will not challenge our compliance with applicable laws, decrees and
regulations. Communications regulators conduct periodic inspections and have the right to conduct additional unscheduled inspections during the year. Until recently, we have been able to cure many, but not all, violations found by the regulators
within the applicable grace period and/or pay fines. However, we cannot assure you that in the course of future inspections conducted by regulatory authorities, we will not be found to have violated any laws, decrees or regulations, that we will be
able to cure such violations within any grace periods permitted by such notices or that Gossvyaznadzor will be satisfied by the remedial actions we have taken or will take.



In 2003 and 2004, we received approximately 55 notices from Gossvyaznadzor with respect to our operations nationwide.
Notices were received with respect to violations of each of our seven regional GSM licenses, including in the Moscow license area. We have complied with the requirements of 33 of these notices and are in the process of complying with the remaining
22 notices. With respect to a number of these 22 notices issued in connection with at least four of our regional GSM licenses, we have not complied within the cure



34



---

##### Table of Contents

periods specified, primarily due to delays in issuances of frequency permits, permissions for the installation of base stations and permissions for the
operation of our equipment and communication facilities in connection with the rollout of our networks. These delays are largely due to the fact that the implementing regulations setting forth the procedure for the issuance of such permits and
permissions under the New Law have not yet been adopted. As a result, the issuance of permits and permissions has been delayed. With respect to a portion of the cure periods which we have not met, Gossvyaznadzor orally extended the time period for
compliance recognizing the cause of the delay, but we have not obtained confirmations of such extensions in writing. Failure to comply with the provisions of a notice due to a delay in the issuance of such permits or permissions by the regulatory
bodies at times has not been, and in the future may not be, an acceptable explanation to the authorities issuing the notices. In addition, these notices include, for example, a challenge to our use of the GSM license for the Moscow license area, the
use of local numbers which have been assigned to other operators such as Combellga, the form of subscriber agreement used in the regions and the form of subscriber agreement concluded by our agent, Corbina-Telecom, with respect to services under our
AMPS/DAMPS license for the Moscow license area. See Risks Related to Our BusinessIf our agency relationship with KB Impuls is determined to violate Russian law and KB Impulss license for the Moscow license area is suspended
or terminated, our business will be materially adversely affected, and Risks Related to Our BusinessWe are required to route our international traffic from our GSM subscribers through Rostelecom but we cannot provide
assurances that Rostelecom will have sufficient capacity or that the regulator will confirm that our routing of traffic complies with this requirement. We cannot assure you that we will be able to cure such violations within the grace periods
permitted by such notices or that the Federal Surveillance Service for Communications will be satisfied by the remedial actions we have taken or will take. In addition, we cannot assure you that our requests for extensions of time periods in order
to enable us to comply with the terms of the notices will be granted. Accordingly, we cannot assure you that such findings by Gossvyaznadzor, its successor entity or any other authority will not result in the imposition of fines or penalties or more
severe sanctions, including the suspension or termination of our licenses, frequency allocations, authorizations, registrations or other permissions, any of which could increase our estimated costs and adversely affect our business.



It may be difficult and expensive for us to comply with applicable requirements of local
authorities.



Local authorities may impose additional
requirements to service public safety announcements in the event of an emergency by posting short messaging service, or SMS, messages to all subscribers. The Moscow city authorities reportedly are currently reviewing whether to implement such
requirements, which would require us to invest in additional equipment to meet capacity demands in order to satisfy such requirements. It may be difficult and expensive for us to comply with any such new requirements.



Russias developing legal system creates a number of uncertainties for our business.



Many aspects of Russias legal system create
uncertainties with respect to many of the legal and business decisions that we make, many of which do not exist in countries with more developed legal systems. The uncertainties we face include, among others:



| |  | changes in Russian law that make it more difficult for us to conduct our business or prevent us from completing certain transactions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| |  | substantial gaps in the regulatory structure created by the delay or absence of implementing regulations for certain legislation;
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| |  | inconsistencies among laws, presidential decrees and ministerial orders and among local, regional and federal legislation and regulations;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| |  | the lack of judicial and administrative guidance on interpreting applicable rules and the limited precedential value of judicial decisions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| |  | an understaffed, underfunded judiciary with limited experience in interpreting and applying market oriented legislation whose independence may be subject to economic, political and
nationalistic influences;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35



---

##### Table of Contents

| |  | decrees, resolutions, regulations and decisions adopted without clear constitutional or legislative basis by governmental authorities and agencies with a high degree of discretion;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | whether it is possible to cure technical breaches of law or regulation or whether there is always a risk that a regulator or a third party may continue to have a cause
of action notwithstanding any attempt to cure breaches;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | federal or regional legislation and regulations may be applied retroactively; and
| | - | ---------------------------------------------------------------------------------



| |  | weak enforcement procedures for court judgments.
| | - | ------------------------------------------------



The nature of much of Russian legislation, the lack of consensus about the scope, content and pace of economic and political reform and the rapid
evolution of the Russian legal system in ways that may not always coincide with market developments place the enforceability and, possibly, the constitutionality of laws and regulations in doubt and result in ambiguities, inconsistencies and
anomalies. In addition, Russian legislation often contemplates implementing regulations that have not yet been promulgated, leaving substantial gaps in the regulatory infrastructure. All of these weaknesses could affect our ability to enforce our
rights under our licenses and under our contracts, or to defend ourselves against claims by others.



Lack of independence and experience of the judiciary, difficulty of enforcing Russian court decisions, Russias unpredictable acknowledgement and enforcement of foreign court judgments or arbitral awards and
governmental discretion in enforcing claims give rise to significant uncertainties.



The independence of the judicial system and its immunity from political, economic and nationalistic influences in Russia remains largely untested. Judicial precedents generally have no binding effect on subsequent
decisions. Not all Russian legislation and court decisions are readily available to the public or organized in a manner that facilitates understanding. The Russian judicial system can be slow. Enforcement of court orders can in practice be very
difficult in Russia. All of these factors make judicial decisions in Russia difficult to predict and effective redress uncertain. Additionally, court claims are often used in furtherance of political aims. We may be subject to such claims and may
not be able to receive a fair hearing. Additionally, court orders are not always enforced or followed by law enforcement agencies.



In addition, the Russian Federation is not party to any multilateral or bilateral treaties with most Western jurisdictions for the mutual enforcement of
court judgments. Consequently, should a judgment be obtained from a court in any of such jurisdictions, it is highly unlikely to be given direct effect in Russian courts. However, the Russian Federation (as successor to the Soviet Union) is a party
to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which we refer to as the New York Convention. A foreign arbitral award obtained in a state that is party to the New York Convention should be recognized
and enforced by a Russian court (subject to the qualifications provided for in the New York Convention and compliance with Russian civil procedure regulations and other procedures and requirements established by Russian legislation and non-violation
of Russian public policy). There is also a risk that Russian procedural legislation will be changed by way of introducing further grounds preventing foreign court judgments and arbitral awards from being recognized and enforced in Russia. In
practice, reliance upon international treaties may meet with resistance or a lack of understanding on the part of Russian courts or other officials, thereby introducing delays and unpredictability into the process of enforcing any foreign judgment
or any foreign arbitral award in the Russian Federation.



Russias
unpredictable federal and local tax systems give rise to significant uncertainties and risks that complicate our tax planning and business decisions.



Taxes payable by Russian companies are substantial and include value added tax, excise duties, profit tax, payroll-related taxes, property taxes and other
taxes. Russias federal and local tax laws and regulations are subject to frequent change, varying interpretations and inconsistent enforcement. In addition, Russias federal



36



---

##### Table of Contents

and local tax collection system and historically large government budget deficits increase the likelihood that Russia will impose arbitrary or onerous taxes
and penalties in the future, which could adversely affect our business. In some instances, even though unconstitutional, Russian tax authorities have applied certain taxes retroactively. In addition to our substantial tax burden, these conditions
complicate our tax planning and related business decisions. For example, some tax laws are unclear with respect to the deductibility of certain expenses and recoverability of VAT and, at times, we have taken positions that we consider to be in
compliance with current law, but have been challenged by the Russian tax authorities. We have been successful in defending our tax positions to date and decisions in our favor have generally not been appealed or have been confirmed on appeal.
However, there is a chance that the tax authorities may decide to appeal certain decisions in the future. Uncertainty related to Russian tax laws exposes us to significant fines and penalties and to enforcement measures despite our best efforts at
compliance, and could result in a greater than expected tax burden.



It is likely that Russian tax legislation will become more sophisticated in the future. The introduction of new tax provisions may affect the overall tax efficiency of our group and may result in significant additional taxes becoming
payable. Although we will undertake to minimize such exposures with effective tax planning, we cannot assure you that additional tax exposure will not arise in the future. Additional tax exposure could cause our financial results to suffer. In
addition, financial statements of Russian companies are not consolidated for tax purposes under Russian law. As a result, each entity in our group pays its own Russian taxes and may not offset its profit or loss against the loss or profit of another
entity in our group, which may result in higher taxes for the group than if taxes were assessed on a consolidated basis.



Laws restricting foreign investment in the telecommunications industry could adversely affect our business.



We could be adversely affected by the passage of new laws or regulations
restricting foreign participation in, or increasing state control of, the Russian telecommunications industry. Since 1996, Russias parliament has considered legislation that would restrict foreign ownership of telecommunications providers,
such as our company, if necessary to protect the public order and national security. We cannot confidently predict whether legislation limiting foreign ownership will be implemented and if so, whether we would have to restructure or reduce our
foreign investors ownership interests, as foreign investors currently own a majority of our outstanding shares of common stock (including shares of common stock evidenced by ADSs). We are uncertain how any required reduction or restructuring
could or would be implemented and what effect it would have on our business. A restructuring or reduction of this nature could cause our business to suffer.



If we lose any of our Central Bank licenses, fail to receive Central Bank or Ministry of Finance licenses when needed or breach any of the terms of such licenses, we
may suffer cash flow difficulties, and a loss or breach of a Central Bank or Ministry of Finance license could trigger an event of default under our loan agreement with J.P. Morgan AG.



Certain capital transactions in foreign currencies currently require
transaction-specific licenses from the Central Bank of Russia. Applying for a Central Bank license is a burdensome and time-consuming process. The Central Bank of Russia may impose additional requirements or deny our application for such licenses,
which could harm our business. We were required to obtain Central Bank licenses in connection with our guarantees to vendors related to a limited amount of vendor-financed equipment purchases ultimately paid for with U.S. dollars or Euros. Russian
foreign currency law also requires us to obtain a Ministry of Finance license for any period during which foreign cellular operators owe us money under our roaming agreements that exceeds 90 days between the date that we render the service and the
date that we settle any amounts owed that are denominated in foreign currencies. Our roaming agreements provide for payment within 90 days in order to avoid the need to apply for such a license. However, if payments are late, we may need to apply
for a license from the Ministry of Finance. The loss of a Central Bank license, our failure to obtain required Central Bank or Ministry of Finance licenses in the future or the breach of a Central Bank or Ministry of Finance license could result in
fines and penalties. Such a loss, failure or breach could also result in a default by our company under the loan agreement that we entered into with J.P. Morgan AG in connection with J.P. Morgan AGs US$250.0 million loan, which was funded by
the issuance of loan



37



---

##### Table of Contents

participation notes by J.P. Morgan AG. See the section of this Annual Report on Form 20-F entitled Item 5Operating and Financial Review and
ProspectsLiquidity and Capital ResourcesFinancing activities. If this occurs, all amounts payable under the loan from J.P. Morgan AG could be accelerated and, if any such acceleration occurs, all amounts payable under our other
loans could be accelerated.



The Russian currency control system could
adversely affect our ability to make payments under our financial obligations.



A new Federal Law No. 173-FZ On Currency Control and Regulation dated on December 10, 2003, which we refer to as the New Currency Law, introduces a new currency control regime that will come into force on
June 18, 2004. According to this new regime, which appears to be more liberal than the existing one, only a limited number of requirements and restrictions can be imposed in respect of currency operations (such as, for instance, requirements
relating to reserves and/or to effect certain operations through special accounts). However, the implementing regulations have not yet been adopted by the Central Bank and the Russian Government for the New Currency Law and it is not possible to
assess the effect those regulations will have on our business or on the payments that we will make under our financial obligations. The New Currency Law or related regulations may result in uncertainties or disputes in interpretation or may be more
restrictive than the existing currency law and regulations. As a result, there may be negative effects on our companys business and our ability to make payments under our financial obligations.



Russias developing securities laws and regulations may limit our ability to attract
future investment and could subject us to fines or other enforcement measures despite our best efforts at compliance, which could cause our financial results to suffer and harm our business.



The regulation and supervision of the securities market, financial
intermediaries and issuers are considerably less developed in Russia than in the United States and Western Europe. Disclosure and reporting requirements, anti-fraud safeguards, insider trading restrictions and fiduciary duties are relatively new to
Russia and are unfamiliar to most Russian companies and managers. In addition, Russian securities rules and regulations can change rapidly, which may adversely affect our ability to conduct securities-related transactions. While some important areas
are subject to virtually no oversight, the regulatory requirements imposed on Russian issuers in other areas impose requirements on Russian issuers not found in other markets and result in delays in conducting securities offerings and in accessing
the capital markets. It is often unclear whether certain regulations, decisions and letters issued by the various regulatory authorities apply to our company. Moreover, some of our subsidiaries have from time to time not been in full compliance with
Russian securities law reporting requirements, violations of which can result in the imposition of fines or difficulties in registering subsequent share issuances. We may be subject to fines or other enforcement measures despite our best efforts at
compliance, which could cause our financial results to suffer and harm our business.



Some transactions between us and interested parties or affiliated companies require the approval of disinterested directors or shareholders and our failure to obtain these approvals could adversely affect our ability to expand our
networks and could have a material adverse effect on our business.



We are required by Russian law and our charter to obtain the approval of disinterested directors or shareholders for transactions with interested parties. In general terms, interested parties include any of our shareholders,
together with their affiliates, that own at least 20.0% of our voting shares, our directors, our Chief Executive Officer or any entities in which these entities or individuals own a specified interest or occupy specified positions. Due to the
technical requirements of Russian law, these same parties may be deemed to be interested parties also with respect to certain transactions between entities within our group. From time to time, we and our subsidiaries engage in various
transactions, including reorganizations, that require special approvals under Russian law, and our subsidiaries engage in numerous transactions which require interested party transaction approvals in accordance with Russian law. For
instance, at our extraordinary general shareholders meeting in October 2003, the merger of VimpelCom-Region and VimpelCom was approved by a majority of the votes of our disinterested shareholders. At our annual general shareholders meeting to be
held in May 2004, the



38



---

##### Table of Contents

merger of our wholly-owned subsidiary KB Impuls into VimpelCom will require the approval of a majority of the votes of our disinterested shareholders. The
failure to obtain the necessary approvals could have a material adverse effect on our business.



In addition, the concept of interested parties is defined with reference to the concepts of affiliated persons,
beneficiaries and group of persons under Russian law, which are subject to many different interpretations. Moreover, the provisions of Russian law defining which transactions must be approved as interested party
transactions are subject to different interpretations. Although we have generally taken a reasonably conservative approach in applying these concepts, we cannot be certain that our application of these concepts will not be subject to challenge. Any
such challenge could result in the invalidation of transactions that are important to our business.



Russian law may expose us to liability for actions taken by our subsidiaries or joint venture entities.



Under Russian law, we may be jointly and severally liable for any obligations of a subsidiary or joint venture entity under a transaction if:



| |  | we have the ability to issue mandatory instructions to the subsidiary or joint venture entity and that ability is provided for by the charter of the subsidiary or joint venture
entity or in a contract between us and them; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the subsidiary or joint venture entity concluded the transaction pursuant to our mandatory instructions.
| | - | --------------------------------------------------------------------------------------------------------



In addition, we may have secondary liability for any obligations of a subsidiary or joint venture entity if:



| |  | the subsidiary or joint venture entity becomes insolvent or bankrupt due to our actions or our failure to act; and
| | - | ------------------------------------------------------------------------------------------------------------------



| |  | we have the ability to make decisions for the subsidiary or joint venture entity as a result of our ownership interest, the terms of a contract between us and them, or in any other
way.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In either of these circumstances, the
shareholders of the subsidiary or joint venture entity may seek compensation from us for the losses sustained by the subsidiary or a joint venture entity if we knew that the action taken pursuant to our instructions or the failure to act would
result in a loss. This type of liability could result in significant obligations and adversely affect our business.



Shareholder rights provisions under Russian law may impose additional costs on us, which could cause our financial results to suffer.



Under Russian law, our shareholders, including holders of our ADSs, that
vote against or abstain from voting on some decisions have the right to sell their shares to us at market value. Our obligation to purchase shares in these circumstances, which is limited to 10.0% of our net assets calculated at the time the
decision is taken according to Russian accounting standards, could have an adverse effect on our cash flow and our ability to service our indebtedness. The decisions that trigger this right to sell shares include:



| |  | a reorganization;
| | - | -----------------



| |  | the approval by shareholders of a major transaction, the value of which comprises more than a certain percentage of our assets, calculated in accordance with Russian
accounting standards, in the event that our board of directors was unable to reach a unanimous decision to approve the transaction and regardless of whether the transaction is actually consummated; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the amendment of our charter in a manner that limits shareholder rights.
| | - | ------------------------------------------------------------------------



In 2000, in compliance with the above-mentioned provisions, we were required to repurchase some of our common shares from shareholders that voted against
or abstained from voting on specific matters relating to our



39



---

##### Table of Contents

July 2000 convertible note/ADS offering. Consequently, we spent approximately US$5.5 million to acquire 103,239 common shares at a price well above the
market price on the actual date of acquisition and prior to the consummation of the transactions the approval of which gave rise to this repurchase obligation. As required by Russian law, we offered our shareholders a similar redemption right in
connection with our transaction with Alfa Group. In October 2001, we spent US$74,880 to acquire 3,744 common shares in connection with this redemption. We may also be required to repurchase our common shares from shareholders who abstain from voting
or vote against our merger with KB Impuls at the general shareholders meeting to be held on May 26, 2004. Our maximum potential exposure to such payments will be 10.0% of our net assets calculated on May 26, 2004 according to Russian accounting
standards and such payments may have an adverse effect on our financial results.



Amendments to the Russian Law On Joint Stock Companies, which were adopted on August 7, 2001 and became effective on January 1, 2002, provide that shareholders, including holders of our ADSs, who vote against or
abstain from voting on a decision to place shares of our stock or convertible securities through a closed subscription (or private placement) have a preemptive right to acquire additional shares or convertible securities at the same price pro rata
to the number of shares they own. This requirement may lead to further delays in completing equity and convertible offerings and may lead to uncertainty with respect to sales of newly-issued shares to strategic investors.



Risks Related to Our Common Stock and ADSs



Voting rights with respect to the shares of common stock represented by ADSs are limited
by the terms of the depositary agreement for the ADSs, our charter and Russian law.



Voting rights with respect to the shares of common stock represented by ADSs may only be exercised in accordance with the provisions of the depositary agreement for the ADSs, our charter and Russian law. However,
there are practical limitations with respect to the ability to exercise voting rights due to the additional procedural steps involved in communicating with shareholders. For example, our charter requires us to notify shareholders at least 30 days in
advance of any general meeting. Our shareholders will receive notice directly from our company and will be able to exercise their voting rights by either attending the meeting in person or voting by proxy.



By contrast, ADS holders will not receive notice directly from us. Rather, in
accordance with the depositary agreement, we will provide the notice to the depositary. In turn, the depositary has undertaken, as soon as practicable thereafter, to mail to ADS holders the notice of such meeting, voting instruction forms and a
statement as to the manner in which instructions may be given by ADS holders. To exercise its voting rights, an ADS holder must then instruct the depositary how to vote the shares underlying the ADSs. Because of this extra procedural step involving
the depositary, the process for exercising voting rights may take longer for an ADS holder than for holders of shares of common stock. ADSs for which the depositary does not receive timely voting instructions will not be voted at any meeting. If
this occurs, an ADS holder generally will not be able to exercise voting rights attaching to the ADSs or the shares of common stock that underlie the ADSs.



Additionally, a Russian regulation was enacted that restricts the total number of shares of outstanding stock allowed to circulate outside of Russia
through an ADS program. Under the regulation, not more than 40.0% of the total number of shares of outstanding stock of each class are allowed to circulate abroad in the form of newly-issued ADSs. Although previous ADS programs, including our
existing ADS program, should be exempt under a grandfather clause in the regulation, in the future we may be required to reduce the size of our ADS program or to amend the depositary agreement for the ADSs.



Telenor and Alfa Group each own a significant portion of our equity that allows each of
them to block shareholder decisions requiring a supermajority vote.



Two of our shareholders, Telenor and Alfa Group, own enough voting stock to block shareholder decisions that require at least a 75.0% majority vote. Telenor recently reported that it owned 25.0% plus 13 shares of our



40



---

##### Table of Contents

voting capital stock and Alfa Group recently reported that it owned 25.0% plus two shares of our voting capital stock. There is a risk that either of them
could use its ability to block certain shareholder decisions in a manner that may not be in our interest or in the interest of our minority shareholders.



The price of our ADSs may be volatile.



The price of our ADSs has been extremely volatile and may continue to be volatile. Although our ADSs are currently listed on The New York Stock Exchange,
or NYSE, it is possible that an active public market for the ADSs will not be sustained. Furthermore, the price at which the ADSs trade could be subject to significant fluctuations caused by a wide variety of factors, including:



| |  | regulatory actions that are harmful to our business;
| | - | ----------------------------------------------------



| |  | rulings in pending court cases that are adverse to our interests or future filings of claims against us by government regulators and subscribers;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our ability to merge with our subsidiaries VimpelCom-Region and KB Impuls or to transfer our licenses, frequencies and other permissions held by VimpelCom-Region or KB Impuls to
VimpelCom in connection with these mergers;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | tariff reductions by us or our competitors;
| | - | -------------------------------------------



| |  | variations in our operating results or financial condition;
| | - | -----------------------------------------------------------



| |  | the addition or loss of subscribers;
| | - | ------------------------------------



| |  | announcements of new products or services by us or our competitors;
| | - | -------------------------------------------------------------------



| |  | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| |  | changes in financial estimates or recommendations by securities analysts;
| | - | -------------------------------------------------------------------------



| |  | economic conditions in Russia;
| | - | ------------------------------



| |  | additions or departures of our key personnel;
| | - | ---------------------------------------------



| |  | future equity or debt offerings or our announcements of equity or debt offerings;
| | - | ---------------------------------------------------------------------------------



| |  | future sales of substantial amounts of the ADSs on the open market or the perception that such sales may occur;
| | - | ---------------------------------------------------------------------------------------------------------------



| |  | general conditions or trends in the wireless telecommunications industry;
| | - | -------------------------------------------------------------------------



| |  | emergence of new competing technologies;
| | - | ----------------------------------------



| |  | investors perception of risks associated with emerging markets; and
| | - | --------------------------------------------------------------------



| |  | other events or factors, many of which are beyond our control.
| | - | --------------------------------------------------------------



In addition, the public markets for stock of companies providing wireless telecommunications, technology and Internet services and products have
experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of such companies. These market and industry factors may materially and adversely affect the price of
the ADSs, regardless of our operating performance. In the past, securities class action litigation has been instituted against companies following periods of volatility in the market price of their securities. This type of litigation initiated
against us could result in substantial costs and a diversion of managements attention and resources.



You may not be able to benefit from the United States-Russia double tax treaty.



The Russian tax rules applicable to U.S. holders of the ADSs are characterized by significant uncertainties and by an absence of interpretive guidance.
Russian tax authorities have not provided any guidance regarding the



41



---

##### Table of Contents

treatment of ADS arrangements, and there can be no certainty as to how the Russian tax authorities will ultimately treat those arrangements. In particular,
it is unclear whether Russian tax authorities will treat U.S. holders as the beneficial owners of the underlying shares for the purposes of the United States-Russia double tax treaty. If the Russian tax authorities were not to treat U.S. holders as
the beneficial owners of the underlying shares, then the U.S. holders would not be able to benefit from the provisions of the United States-Russia double tax treaty and would consequently face additional tax liability.



We have not paid dividends on our common stock and ADSs, which may make us less attractive
to investors.



To date, we have not paid dividends on our
shares of common stock. Our decision not to pay dividends in the future could adversely affect the value of our common stock or ADSs. Our ability to pay dividends is limited by the terms of certain of our indebtedness, as well as by Russian law, in
several ways. For example, we are permitted to pay dividends only out of our net profits for the current year as calculated according to Russian accounting standards. Because we may not pay dividends in the future, your return on an investment in
the ADSs will likely depend on your ability to sell the ADSs for a profit.



42



---

##### Table of Contents

|ITEM 4. | Information on the Company
|------- | --------------------------



Overview



The following
chart sets forth our company and some of our subsidiaries, including our subsidiaries that hold our principal GSM licenses.



LOGO

---

|(1) | Holds AMPS/D-AMPS licenses for the Moscow, Tver, Ryazan, Vladimir, Kaluga and Vologda license areas.
|--- | ----------------------------------------------------------------------------------------------------

|(2) | Holds a GSM license for the Moscow license area. On March 24, 2004, our board of directors recommended to our shareholders to approve the merger of KB Impuls into VimpelCom. Our
shareholders will vote on the merger at the annual general meeting of shareholders to be held on May 26, 2004. The merger of KB Impuls into VimpelCom is subject to various Russian regulatory approvals and the satisfaction of certain other conditions
precedent, including the transfer or reissuance of the telecommunications licenses, frequencies and other permissions held by KB Impuls to VimpelCom.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Holds GSM licenses for the Central and Central Black Earth, North Caucasus, Northwest, Siberian and Volga super-regions. On October 24, 2003, our shareholders approved the merger of
VimpelCom-Region into VimpelCom. The merger of VimpelCom-Region into VimpelCom is subject to the transfer or reissuance of the telecommunications licenses, frequencies and other permissions held by VimpelCom-Region to VimpelCom.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Holds a GSM license for the Ural super-region. Upon the completion of the merger of VimpelCom-Region into VimpelCom, Vostok-Zapad Telecom will become a wholly-owned subsidiary of
VimpelCom.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Holds a GSM-1800 license and an AMPS/D-AMPS license for the Samara license area, which is located in the Volga super-region.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(6) | Holds an AMPS/D-AMPS license for the Novosibirsk license area, which is part of the Siberian super-region.
|--- | ----------------------------------------------------------------------------------------------------------

|(7) | Holds a GSM license for the Stavropol region, which is part of the North Caucasus super-region.
|--- | -----------------------------------------------------------------------------------------------

|(8) | Holds a GSM license and an AMPS/D-AMPS license for the Orenburg region, which is part of the Ural super-region.
|--- | ---------------------------------------------------------------------------------------------------------------

|(9) | Holds a GSM license for the Kaliningrad region, which is part of the Northwest super-region.
|--- | --------------------------------------------------------------------------------------------

|(10) | Holds a GSM license for the Kabardino-Balkarskaya Republic, which is located in the North Caucasus super-region.
|---- | ----------------------------------------------------------------------------------------------------------------

|(11) | Holds a GSM license for the Karachaevo-Cherkesskaya Republic, which is located in the North Caucasus super-region.
|---- | ------------------------------------------------------------------------------------------------------------------



We are a leading provider of wireless telecommunications services in Russia,
operating under the Bee Line GSM brand name. Bee Line GSM is one of the most recognized brand names in Russia. Independent sources estimate that our nationwide market share of subscribers was 31.6% as of December 31, 2003, compared to
28.6% as of December 31, 2002. Based on independent estimates of the number of subscribers of our competitors in the Moscow license area, we estimate that our market share in the Moscow license area was 49.3% as of



43



---

##### Table of Contents

December 31, 2003, compared to 51.6% as of December 31, 2002. We estimate that our market share in the regions outside of the Moscow license area was 23.2%
as of December 31, 2003, compared to 13.3% as of December 31, 2002.



Our GSM licenses permit us to operate wireless networks in areas populated by approximately 134.0 million people, or approximately 92.0% of the Russian population as of December 31, 2003. We hold GSM licenses for seven out of Russias
eight super-regions, including the Moscow license area. Additionally, we hold GSM licenses for six smaller regions, all of which are located within the seven super-regions, including the Moscow license area.



As of December 31, 2003, we had approximately 11.4 million subscribers on our
wireless networks, compared to approximately 5.2 million as of December 31, 2002. Of our total number of subscribers as of December 31, 2003, approximately 5.7 million, or 49.5%, were in the Moscow license area and approximately 5.8 million, or
50.5%, were in the regions outside of the Moscow license area. We increased our subscriber base in the Moscow license area by 52.4% in 2003 and 94.3% in 2002. During the same periods, our subscriber base in the regions outside of the Moscow license
area increased by 301.1% and 619.1%, respectively. As of March 31, 2004, we had approximately 13.4 million subscribers on our networks, with approximately 6.0 million subscribers, or 45.2%, in the Moscow license area and approximately 7.3 million
subscribers, or 54.8%, in the regions outside of the Moscow license area.



In 1998, we were the first major wireless services provider in Russia to offer prepaid wireless plans to our subscribers. In 1999, we became the first wireless services provider in the Moscow license area to actively
market our services to the mass market, and we invested heavily in the acquisition of these subscribers. Following the success of our mass market growth strategy, we commenced marketing our improved GSM products and services to large corporations,
small and medium-sized businesses and high income individuals. We benefit significantly from the strengths and expertise of our two strategic partners, Telenor and Alfa Group.



Strategic Relationships



Telenor



Telenor, Norways leading telecommunications company, became our strategic partner in December 1998. Telenor owns 25.0% plus 13 shares of our voting capital stock. Telenor also owns approximately 14.9% of the
voting capital stock of our subsidiary, VimpelCom-Region, which is currently in the process of merging into VimpelCom. Following the merger of VimpelCom-Region into VimpelCom, Telenor will own approximately 26.6% and 29.9% of our companys
total voting capital stock and total common stock, respectively. Telenor brings to our alliance valuable experience in developing and implementing wireless voice and data services and sophisticated marketing techniques. In addition, our strategic
relationship with Telenor has provided our company with expertise in a number of areas, including:



| |  | Product and technology development.As we implement our wireless data and Internet strategy, we have and will continue to draw on Telenors expertise in product
development and implementation, including wireless application protocol, or WAP, global packet radio services, or GPRS, multimedia messaging, or MMS, and other new products and technologies; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Development of the mass market.Telenor helped to develop Norway into one of the worlds most penetrated wireless telecommunications markets and provides valuable
expertise to us as we continue to develop the mass market subscriber segment in Russia.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Telenor is one of the leading foreign investors in the Russian telecommunications industry. We recently acquired from Telenor its interests in Closed
Joint Stock Company Extel, or Extel, and Closed Joint Stock Company StavTeleSot, or StavTeleSot, two regional operators in Russia, as part of our regional expansion program.



44



---

##### Table of Contents

In October 2002, Storm LLC, of which Alfa Group owns 50.1%, acquired from Telenor 7.7% of the issued and
outstanding shares of Kyivstar GSM, Ukraines largest mobile telecommunications service provider (based on number of subscribers). Upon completion of the transaction, Telenor and Storm LLC owned 54.2% and 40.1%, respectively, of Kyivstar GSM.
As of December 31, 2003, Kyivstar GSM was reported to have approximately 3.0 million subscribers, or a 47.5% share of the Ukrainian wireless market.



Alfa Group



On November 5, 2001, Alfa Group, through Eco Telecom Limited, part of the Alfa Group of companies, completed the purchase of 5,150,000 newly-issued common
shares of VimpelCom for US$103.0 million. Pursuant to the terms of the transaction agreements, which were signed on May 30, 2001, we contributed this US$103.0 million (together with an additional US$15.6 million of our own funds, at the exchange
rate as of the date of contribution) as equity to VimpelCom-Region, representing the first of three tranches of equity investments. On November 12, 2002, the second tranche of equity investments in VimpelCom-Region was completed when each of Alfa
Group, Telenor and VimpelCom purchased 1,462 newly-issued common shares for US$58.5 million. On August 27, 2003, Alfa Group completed the third and final tranche of equity investments in VimpelCom-Region by purchasing 1,463 newly-issued common
shares for US$58.5 million. Alfa Group currently owns 25.0% plus two shares of the voting capital stock of VimpelCom and approximately 29.8% of the voting capital stock of VimpelCom-Region. VimpelCom and Telenor own approximately 55.3% and 14.9%,
respectively, of the voting stock of VimpelCom-Region. Following the merger of VimpelCom-Region into VimpelCom, Alfa Group will own approximately 32.9% and 24.5% of VimpelComs total voting stock and total common stock, respectively.



Alfa Groups extensive operations throughout the regions
of Russia, combined with its position as one of Russias largest financial industrial groups, has made it a key partner for us in our transformation into a leading nationwide wireless operator. Alfa Group was formed in Russia in July 1988 and
is involved in the Russian banking, insurance, asset management, oil and gas and telecommunications sectors. In particular, through Alfa Bank, one of the largest banks in Russia, Alfa Group is active in the regions of Russia outside of Moscow. We
believe that the combination of Telenors expertise in wireless telecommunications and Alfa Groups extensive knowledge of the regions has created a complementary strategic partnership and a strong platform from which we can continue to
build one of Russias leading nationwide wireless operators.



Golden Telecom, Inc., a Russian fixed line telecommunications and Internet service provider, recently reported that Alfa Group beneficially owned, through Alfa Telecom Limited, approximately 30.0% of Golden Telecoms common stock. In
December 2003, Telenor announced that it acquired 19.5% of Golden Telecom in exchange for Telenors 100.0% stake in Open Joint Stock Company Comincom, the parent company of Open Joint Stock Company Combellga. Telenor
reported that it owned approximately 20.5% of Golden Telecoms common stock following the transaction. Golden Telecom LLC, a small Ukrainian mobile telecommunications service provider, is a subsidiary of Golden Telecom, Inc. In connection with
any future expansion outside of Russia, we believe that we can benefit from Telenors and Alfa Groups activities in other countries of the CIS.



According to press reports, Alfa Group recently announced that Alfa Telecom Limited (an affiliate of Alfa Group) will own, directly or indirectly, all
telecommunications assets of Alfa Group, including Alfa Groups investments in Golden Telecom, our company, MegaFon and Kyivstar, and be responsible for investments in companies in the telecommunications sector.



History and Development of the Company



We are an open joint stock company organized under the laws of the Russian
Federation. Our company was registered in the Russian Federation on September 15, 1992 as a closed joint stock company and re-registered as an open joint stock company on July 28, 1993. Our principal executive offices are located at 10 Ulitsa
8-Marta, Building 14, Moscow, Russian Federation 127083. Our telephone number at that location is +7 (095) 974-5888. Our web site can be found at http://www.vimpelcom.ru.



45



---

##### Table of Contents

On October 24, 2003, our shareholders approved the merger of VimpelCom-Region into VimpelCom. Under the
terms of the merger, Telenor and Alfa Group will receive, respectively, 3,648,141 and 7,300,680 newly-issued common shares of VimpelCom in exchange for their shares of voting capital stock of VimpelCom-Region. Upon completion of the merger, Telenor
will own approximately 26.6% and 29.9%, respectively, and Alfa Group will own approximately 32.9% and 24.5%, respectively, of VimpelComs total voting stock and common shares. On April 16, 2004, our shareholders approved amendments to our
charter that will become effective upon registration with the appropriate authority. Once these charter amendments are registered and certain ancillary steps taken (including the issuance of shares to Telenor and Alfa Group, and exclusion of
VimpelCom-Region from the state register of legal entities), the merger of VimpelCom-Region into VimpelCom will be complete. We plan to register the charter amendment either when the licenses, frequencies and other permissions held by
VimpelCom-Region are reissued to VimpelCom or when we receive assurance from the appropriate regulatory authority that they will be reissued to VimpelCom following the merger of VimpelCom-Region into VimpelCom. The current legal and regulatory
regime is unclear about the timing and procedure of such transfer or reissuance in the event of a merger and we cannot assure you that we will be able to complete the merger.



On March 24, 2004, our board of directors recommended to our shareholders to approve the merger of our wholly-owned
subsidiary, KB Impuls, into VimpelCom. KB Impuls holds our groups GSM-900/1800 license and other related licenses, frequencies and permissions for the City of Moscow and the Moscow region. Our shareholders will vote on the merger at the annual
general meeting of shareholders to be held on May 26, 2004. The merger of KB Impuls into VimpelCom is subject to various Russian regulatory approvals and the satisfaction of certain other conditions precedent, including the transfer or reissuance of
the telecommunications licenses, frequencies and other permissions held by KB Impuls to VimpelCom.



For a description of some of the risks associated with the completion of the mergers of VimpelCom-Region and KB Impuls into our company and the
corresponding transfer of licenses, frequencies and other permissions, please refer to the section of this Annual Report on Form 20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessIf we are
unable to complete our mergers with VimpelComRegion and KB Impuls or some or all of VimpelCom-Regions and KB Impulss licenses, frequencies and other permissions are not transferred or reissued to us during the merger process, our
business may be materially adversely affected.



Competitive Strengths



We believe that we are well positioned to capitalize on
opportunities in the Russian wireless telecommunications market. We seek to differentiate ourselves from our competitors by providing innovative and high-quality wireless service packages, specialized customer care and a recognized brand name:



| |  | Recognized brand name.We market our services under our Bee Line GSM brand name. Primarily as a result of our innovative marketing and licensing efforts, our Bee
Line GSM brand name is among the most recognized brand names in Russia. We strongly believe that the Bee Line GSM brand provides us with an excellent platform from which we can launch new wireless telecommunications services and ventures in Russia.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Product and service innovation.We offer wireless service packages designed to address the specific needs of major target market segments. For instance, our contract service
packages offer features targeted at large corporate and high usage subscribers, including small and medium-size business subscribers, while our Bee+ prepaid service packages offer features targeted at the mass market subscriber segment.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Specialized customer care.We differentiate our customer service based on our primary subscriber segments. We believe that our ability to provide specialized customer service
has helped us maintain a high level of subscriber satisfaction with our products and services and control churn.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Broad distribution network.We believe we have developed the largest distribution network for wireless services in the Moscow license area with 74
independent dealers and 3,704 points of sale. We also have over 1,000 independent dealers and more than 8,850 points of sale in the regions outside of
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



46



---

##### Table of Contents

| | the Moscow license area. As of December 31, 2003, our prepaid scratch cards, which are prepaid phone cards sold at a discount to face value, could be
purchased at approximately 6,500 locations in the Moscow license area and approximately 18,150 locations in the regions outside of the Moscow license area. Our retail distribution channel for prepaid scratch cards includes large chains of electronic
stores and other consumer retail stores and selected branch offices of banks, including Sberbank. In addition, as of December 31, 2003, we had three sales offices in the Moscow license area and 78 sales offices in the regions outside of the Moscow
license area. In the first quarter of 2001, we acquired the Mobile Center dealer network, one of the largest retail dealer networks in Moscow, for approximately US$3.2 million. This acquisition added 12 additional offices to our
distribution network. As of December 31, 2003, we had 37 Mobile Center sales offices in the Moscow license area. We also employ a direct sales force that focuses its efforts on sales to corporate and high usage subscribers, including
small and medium-size business subscribers.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | High-quality wireless network.We build our wireless networks with advanced technology from the worlds leading wireless telecommunications equipment suppliers, such as
Alcatel, Ericsson and Nokia, in order to provide our subscribers with high-quality, dependable networks capable of offering enhanced value added services and features. In addition, our GSM network allows for a variety of value added services such as
greater call privacy, caller-ID, call forwarding, call waiting, short messaging service, or SMS, and more complex data transmission features, including facsimile, electronic mail, wireless Internet and data network access.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Strategy



We believe that with our experience building high-quality GSM networks and attracting the mass market subscriber segment in
the Moscow license area, coupled with the expertise of our strategic partners, Telenor and Alfa Group, we are well prepared to build on our position as a premier national wireless telecommunications services provider and continue the successful
regional roll-out of our company. Our strategy focuses on:



| |  | National expansion.Since 2001, we have pursued an aggressive national growth strategy by developing our super-regional GSM license areas.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| |  | Opportunity for growth.Improving economic conditions in Russia combined with the relatively low wireless penetration rates in the regions outside of Moscow and St.
Petersburg present us with significant growth opportunities. In addition, wireless telephony often acts as a substitute for fixed line services in the regions. According to GSM Association, Russia was the second fastest growing wireless service
market in the world in 2003, in terms of the number of new subscribers. The number of telecommunications subscribers in Russia increased from 18.0 million in the beginning of the year to 36.2 million at the end of 2003. Industry analysts expect this
growth to continue and the number of cellular subscribers to reach 55.0 to 60.0 million in 2004. This growth predominantly comes from the regions as the penetration rate exceeded 70.0% in the Moscow license area and 60.0% in St. Petersburg, as of
March 2004. The regions generally have lower per capita wealth and disposable income than the Moscow license area, but operational expenses in the regions are also lower and capital expenditure per subscriber is lower because of the falling costs of
network equipment. Consequently, we expect margins in the regions to be similar to those in Moscow as the regional operations become more mature. We intend to focus our regional expansion, marketing and distribution efforts on areas with higher
population density, based on factors such as commercial practicability, strategic importance, market potential, regulatory requirements and competition. In 2003, we expanded our operations in Russia to 15 new regions and, as of December 31, 2003, we
operated in 55 of the 89 administrative regions of the Russian Federation. Further expansion of our GSM network into the remaining regions is an essential component of our strategy to build on our position as a premier national wireless
telecommunications operator.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Continued expansion in the regions.We have expanded in the regions primarily through organic growth, augmented by a few selective acquisitions of existing
operators for the primary purpose of obtaining their subscribers. Our growth strategy has served us well and we intend to continue to
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



47



---

##### Table of Contents

| | expand in the regions in this manner. The recent growth in our subscriber base is favorable and in the three months ended March 31, 2004, we added
approximately 1.6 million new subscribers in the regions outside of the Moscow license areas. In the future, we will endeavor to gain access to operations in the Far East super-region, the last remaining super-region in Russia for which we do not
have a wireless license. For further information on this risk, see the section in this Annual Report on Form 20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessIt may be more difficult for us
to attract new subscribers in the regions outside of Moscow than it is for our competitors that established a local presence prior to the time that our company did.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Unified national business model.We have designed and implemented a unified national business model that draws on our considerable knowledge, experience and expertise with
respect to technology and consumers nationally. Our national business model enables us to develop uniform procedures for rolling out our network in the regions, increase network standardization and achieve greater economies of scale in the areas of
sales and marketing, customer service, information technology, billing and human resources. This unified approach facilitates our development of a single, strong, national brand name and allows us to offer our existing and potential subscribers the
same tariff structures and product lines in all of the regions where we operate. While implementing this model, we migrated our regional subscribers to a state-of-the-art scalable billing system supplied by Amdocs and introduced a modern customer
relations management system. We believe we were the first in Russia, and one of the first in the world, to introduce on-line national prepaid roaming. We also provide GPRS-based service across the country and have opened super-regional call centers
to better serve our millions of subscribers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Maintaining our position as one of the leading providers of GSM wireless telecommunications services in the Moscow license area. As of March 31, 2004, we had approximately
6.0 million subscribers in the Moscow license area. The Moscow license area has matured, with penetration rates exceeding 70.0% as of March 31, 2004. In confronting the increased competition, we are focusing on three primary subscriber market
segments:
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Large corporate users.We will continue our efforts to increase our market share of large corporate users by designing programs to attract these higher revenue-generating
subscribers. These efforts include establishing specialized corporate plans and roaming arrangements, enhancing our specialized customer service, increasing our direct sales forces, launching new dedicated corporate sales offices and providing
subscribers with access to the newest handsets, accessories and value added services. We also intend to develop new programs offering nationwide services that can be tailored to meet specific corporate needs and market them to corporations that
operate both in Moscow and in the regions where we operate.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Small and medium-size businesses and high-income individuals.We believe that the key to the successful penetration of this segment of the market will be the continuous
improvement of service quality and product offerings. We are upgrading our information technology support systems as well as continuously improving our customer service. Further, we intend to continue to employ tailored marketing promotions to
attract these high usage subscribers and to continue using targeted subscriber retention programs. To attract individual subscribers, we offer a credit contract system with various contract plans, free incoming calls from mobile phones and dedicated
customer service.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Mass market.We will continue to penetrate the Moscow mass market subscriber segment through prepaid card services, innovative tariff plans and service features intended to
address the specific needs of these subscribers. We believe we have developed the largest distribution network for wireless services in the Moscow license area. As of December 31, 2003, we had 74 independent dealers and 3,704 points of sale and our
prepaid scratch cards could be purchased at approximately 6,500 locations in the Moscow license area.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Increasing revenues from non-voice wireless services.We intend to increase usage among our existing subscribers and attract new subscribers by offering
value added services and allowing our subscribers to access a wide range of services through our networks. The value added services that we offer are
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



48



---

##### Table of Contents

| | becoming an increasingly important part of our strategy both in the Moscow market, which is approaching saturation, and in the regions, which are rapidly
developing. We currently provide traditional value added services such as voice mail, call forwarding, call waiting, conference calling, call blocking, caller-ID, automatic dialing and voice dialing. We also provide and are focusing on a variety of
messaging services, such as outgoing SMS, EMS, MMS, e-mail, content delivery, games and other infotainment services. Messaging and infotainment services are currently available on all our networks through our Internet portal, BeeOnline,
and through our Beeinfo mobile information guide. We have also launched content provider access, or CPA, which will stimulate the growth of content based services. CPA is an infotainment service through which we distribute information and services
from third parties to our subscribers. In addition, our Beepay payment system offers many convenient ways to pay for our services and our Beebonus card allows customers to accumulate bonus points by purchasing products from participating vendors,
which can then be used to pay for our services. Capitalizing on new technology-enabled opportunities, we also provide WAP technology services and GPRS. As of December 31, 2003, we provided GPRS roaming with 50 operators in 34 countries, including
all major European countries and the United States. While there is still relatively low usage of non-voice services in the Russian market compared to countries with higher wireless penetration rates, non-voice service usage in Russia is growing. As
of December 31, 2003, revenue generated by non-voice services as a percentage of total services reached 11.4% compared with 7.4% in the year ended December 31, 2002. We are also actively using Internet technology to support business processes and to
increase subscriber loyalty and satisfaction.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Incorporate new technologies into our operations.As part of our overall business strategy, we intend to evaluate emerging, state-of-the-art technologies that may be used to
complement our existing operations. For example, we have constructed and tested a pilot 3G network, and we intend to introduce 3G technology in some of the biggest cities in our network as soon as 3G licenses become available to us. For further
information about the pilot 3G network, please see the section below entitled CompetitionNew technology. In addition, in cooperation with Cisco Systems, we are exploring the possibility of offering to our subscribers wireless
local area networks, or WLANs, which permit individuals to connect wirelessly to the Internet through a local area network. Initially, we intend to explore the possibility of introducing WLANs in airports, hotels and business centers, which would
allow individuals to connect wirelessly to the Internet via a WLAN or our network using GPRS. For a description of some of the risks involved with these new technologies, please see the section of this Annual Report on Form 20-F entitled Item
3Key InformationD. Risk FactorsRisk Related to Our BusinessWe face competition from an increasing number of technologies and may face greater competition as a result of the issuance of new wireless licenses.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Expansion in the Commonwealth of Independent States.To date, our strategic focus has been on Russia. In 2003, Russia was the second fastest growing wireless service market
in the world in terms of the number of new subscribers. In the future, we intend to explore our opportunities for expansion in other countries in the CIS, taking into consideration the economic and political environment and size of the territory and
population, as well as the competitive situation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Licenses



GSM



We hold GSM licenses for seven out of eight of Russias super-regions: the Moscow license area, the Central and Central
Black Earth license area, the North Caucasus license area, the Northwest license area (which includes the City of St. Petersburg), the Siberian license area, the Ural license area and the Volga license area. In total, these GSM licenses cover
approximately 92.0% of Russias population. These GSM licenses permit us to operate a unified dual band GSM-900/1800 network. Our regional GSM licenses for the Central and Central Black Earth, North Caucasus, Siberian and Volga regions were
reissued on April 7, 2000 to our wholly-owned subsidiary, VimpelCom-Region. The material terms of the licenses did not change upon reissuance to VimpelCom-Region. Therefore, the start-of-service requirements under the reissued licenses were deemed
to



49



---

##### Table of Contents

have been satisfied by our existing service in those super-regions. We are currently in the process of merging VimpelCom-Region into VimpelCom, and we are
seeking shareholder approval for the merger of KB Impuls into VimpelCom at our annual general meeting of shareholders to be held on May 26, 2004. Accordingly, we intend to seek a transfer or reissuance of the VimpelCom-Region and KB Impuls licenses,
frequencies and other permissions to Vimpel Com. For a description of some of the risks associated with the completion of the mergers of VimpelCom-Region and KB Impuls into our company and the transfer or reissuance of licenses, frequencies and
other permissions, please refer to the section of the Annual Report on Form 20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessIf we are unable to complete our mergers with VimpelCom-Region
and KB Impuls or some or all of VimpelCom-Regions and KB Impulss licenses, frequencies and other permissions are not transferred or reissued to us during the merger process, our business may be materially adversely affected.



VimpelCom-Region also holds our GSM license for the Northwest
region. We received a GSM-1800 license for the Northwest region in September 2002. In March 2003, the former Ministry of Communications amended our initial GSM license for the Northwest region to permit us to operate a dual band GSM-900/1800 network
in St. Petersburg and the surrounding Leningrad region. VimpelCom-Region holds our GSM license for the Ural region through its wholly-owned subsidiary, Vostok-Zapad Telecom, which it acquired in December 2002. Vostok-Zapad Telecoms GSM license
provides for the operation of a GSM-1800 network in the entire Ural region and a dual band GSM-900/1800 network in seven out of 12 territories within the region. In addition to the seven super-regional GSM licenses, we hold GSM licenses for the
following six territories, all of which are located within the seven super-regions: Kaliningrad, within the Northwest region; Samara, within the Volga region; Orenburg, within the Ural region; and Stavropol, the Kabardino-Balkarskaya Republic and
the Karachaevo-Cherkesskaya Republic, all within the North Caucasus region. These territorial GSM licenses are held through subsidiaries that VimpelCom-Region acquired in 2002 and 2003. VimpelCom-Region launched 26 networks in the year ended
December 31, 2002 and 15 networks in the year ended December 31, 2003.



Since January 2001, we have been required to pay fees, calculated as a portion of our revenues for services provided in each region, to the former Ministry of Communications on a monthly basis. This fee was unilaterally imposed by the
former Ministry of Communications by an amendment to our GSM licenses for the Moscow license area, the Central and Central Black Earth, North Caucasus, Siberian and Volga regions and our Moscow D-AMPS license. In accordance with the terms of our
licenses, as of April 2001, the amount of this fee is 0.3% of revenues earned under our licenses (calculated in Russian rubles and in accordance with applicable Russian tax laws). The GSM licenses that we obtained in 2002 covering the Northwest and
Ural regions are also subject to these fees. In 2003, we transferred the ruble equivalent of approximately US$2.3 million to the former Ministry of Communications.



50



---

##### Table of Contents

The following tables summarize the principal terms of our super-regional and territorial GSM licenses,
including the license areas, issue dates, start-of-service requirements, expiration dates, line capacity requirements and territorial coverage requirements.



Principal Terms and Conditions of our Super-Regional GSM Licenses



|                                |  |               |  |                             |  |                |  |                      |  |                           |  |                                                       
|------------------------------- |  | ------------- |  | --------------------------- |  | -------------- |  | -------------------- |  | ------------------------- |  | ------------------------------------------------------
|                                |  |               |  |                             |  |                |  | Certain Requirements
|License Area                    |  | Issue Date    |  | Start-of-ServiceRequirement |  | ExpirationDate |  | ComplianceDate       |  | Line CapacityNo Less Than |  | Territorial Coverage(Cities) or PopulationCoverage (%)
|Moscow(1)                       |  | Apr. 28, 1998 |  | Dec. 31, 1998               |  | Apr. 28, 2008  |  | Dec. 31, 2001        |  | 100,000                   |  | Moscow license area                                   
|Central and Central Black Earth |  | Apr. 7, 2000  |  | July 7, 2000                |  | Apr. 28, 2008  |  | Dec. 31, 2001        |  | 20,000                    |  | 17 cities(2)                                          
|North Caucasus                  |  | Apr. 7, 2000  |  | July 7, 2000(3)             |  | Apr. 28, 2008  |  | Dec. 31, 2001        |  | 50,000                    |  | 10 cities(4)                                          
|Northwest(5)                    |  | Sep. 12, 2002 |  | Mar. 12, 2004               |  | Sep. 12, 2012  |  | Dec. 31, 2004        |  | 10,000                    |  | 20.0%                                                 
|                                |  |               |  |                             |  |                |  | Dec. 31, 2006        |  | 50,000                    |  | 40.0%                                                 
|                                |  |               |  |                             |  |                |  | Dec. 31, 2011        |  | 200,000                   |  | 80.0%                                                 
|Siberian                        |  | Apr. 7, 2000  |  | July 7, 2000                |  | Apr. 28, 2008  |  | Dec. 31, 2001        |  | 48,000                    |  | 12 cities(6)                                          
|Ural(7)                         |  | Nov. 14, 2002 |  | May 14, 2004                |  | Nov. 14, 2012  |  | Dec. 31, 2005        |  | 50,000                    |  | 30.0%                                                 
|                                |  |               |  |                             |  |                |  | Dec. 31, 2012        |  | 200,000                   |  | 70.0%                                                 
|Volga                           |  | Apr. 7, 2000  |  | July 7, 2000                |  | Apr. 28, 2008  |  | Dec. 31, 2001        |  | 14,000                    |  | 14 cities(8)                                          

---

|(1) | See the section below entitled Legal Proceedings. For a description of some of the risks associated with our license covering the Moscow license area, see
Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessIf our agency relationship with KB Impuls is determined to violate Russian law and KB Impulss license for the Moscow license area is suspended or
terminated, our business will be materially adversely affected.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Covers the cities of Belgorod, Bryansk, Ivanovo, Kaluga, Kostroma, Kursk, Lipetsk, Nizhniy Novgorod, Orel, Ryazan, Smolensk, Tambov, Tula, Tver, Vladimir, Voronezh and Yaroslavl.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | This license was amended to allow us to commence providing services no later than December 31, 2002 in the Republic of Dagestan and no later than December 31, 2004 in Ingushetia and
Chechnya.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The 10 cities covered are: Grozny, Krasnodar, Maikop, Makhatchkala, Nalchik, Nazran, Rostov-on-Don, Tcherkessk, Stavropol and Vladikavkaz. We must also cover Chechnya, Ingushetia,
but based on the extension of the start-of-service dates for these areas, we believe the date by which the territorial coverage requirement must be met has also been extended.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | VimpelCom-Region holds a GSM-1800 license covering the territories of Karelia, St. Petersburg, Arkhangelsk, Vologda, Kaliningrad, Leningrad Murmansk, Novgorod, Pskov, and Nenetz. In
March 2003, the license was amended to allow the operation of a GSM-900/1800 network for St. Petersburg and Leningrad.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Covers the cities of Abakan, Barnaul, Dudinka, Gorno-Altaysk, Kemerovo, Krasnoyarsk, Kyzyl, Novokuznetsk, Novosibirsk, Omsk, Tomsk and Tara.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(7) | In December 2002, VimpelCom-Region acquired 100.0% of Vostok-Zapad Telecom. Vostok-Zapad Telecom holds a GSM-1800 license covering all 12 territories of the Ural super-region and a
GSM-900/1800 license covering seven territories of the Ural super-region (Komi Republic, Udmurtskaya Republic, Kirov, Kurgan, Sverdlovsk, Komi-Permyatsky autonomous okrug and Yamal-Nenets).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Covers the cities of Astrakhan, Elista, Kazan, Naberezhnye Chelny, Penza, Samara, Saransk, Saratov, Tcheboksary, Togliatti, Ufa, Ulyanovsk, Volgograd and Yoshkar-Ola.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



51



---

##### Table of Contents

Principal Terms and Conditions of our Territorial GSM Licenses



|                        |  |                |  |                             |  |                |  |                      |  |                           |  |                    
|----------------------- |  | -------------- |  | --------------------------- |  | -------------- |  | -------------------- |  | ------------------------- |  | -------------------
|                        |  |                |  |                             |  |                |  | Certain Requirements
|License Area            |  | Issue Date     |  | Start-of-ServiceRequirement |  | ExpirationDate |  | ComplianceDate       |  | Line CapacityNo Less Than |  | TerritorialCoverage
|Kabardino-Balkarskaya   |  |                |  |                             |  |                |  |                      |  |                           |  |                    
|Republic(1)             |  | Mar. 17, 2000  |  | Mar. 17, 2001               |  | Mar. 17, 2010  |  | Dec. 31, 2001        |  | 500                       |  | 5.0%               
|                        |  |                |  |                             |  |                |  | Dec. 31, 2002        |  | 1,300                     |  | 10.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2004        |  | 3,000                     |  | 30.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2009        |  | 5,000                     |  | 60.0%              
|Kaliningrad(2)          |  | Nov. 4, 1996   |  | Feb. 1, 1998                |  | Aug. 1, 2006   |  | Dec. 31, 1996        |  | 1,500                     |  | 10.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 1997        |  | 2,000                     |  | 20.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 1998        |  | 3,714                     |  | 30.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 1999        |  | 6,000                     |  | 50.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2001        |  | 19,269                    |  | 95.0%              
|Karachaevo-Cherkesskaya |  |                |  |                             |  |                |  |                      |  |                           |  |                    
|Republic(3)             |  | May 19, 2000   |  | May 19, 2001                |  | May 19, 2010   |  | Dec. 31, 2001        |  | 100                       |  | 10.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2010        |  | 40,000                    |  | 60.0%              
|Orenburg(4)             |  | June 13, 2000  |  | June 13, 2001               |  | June 13, 2010  |  | Dec. 31, 2001        |  | 10,000                    |  | 5.0%               
|                        |  |                |  |                             |  |                |  | Dec. 31, 2003        |  | 20,000                    |  | 10.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2005        |  | 30,000                    |  | 16.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2010        |  | 60,000                    |  | 32.0%              
|Samara(5)               |  | April 17, 2002 |  | Oct. 17, 2003               |  | April 17, 2012 |  | Dec. 31, 2004        |  | 20,000                    |  | 30.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2011        |  | 80,000                    |  | 70.0%              
|Stavropol(6)            |  | Mar. 7, 1997   |  | Mar. 7, 1998                |  | Mar. 7, 2007   |  | Dec. 31, 1998        |  | 3,000                     |  | 10.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2000        |  | 10,000                    |  | 60.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2003        |  | 20,000                    |  | 80.0%              
|                        |  |                |  |                             |  |                |  | Dec. 31, 2007        |  | 40,000                    |  | 90.0%              

---

|(1) | The GSM-900 license for the Kabardino-Balkarskaya Republic, which is part of the North Caucasus super-region, is held by Kabardino-Balkarsky GSM, 80.0% of which is owned by
StavTeleSot. See note (6) below.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In December 2002, VimpelCom-Region acquired 100.0% of Extel. Extel holds a GSM-900 license for the Kaliningrad region, which is part of the Northwest super-region.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The GSM-900 license for the Karachaevo-Cherkesskaya Republic, which is part of the North Caucasus super-region, is held by Karachaevo-CherkesskTeleSot, 80.0% of which is owned by
StavTeleSot. See note (6) below.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | In July and October 2002, VimpelCom-Region acquired 98.8% of Orensot. Orensot holds GSM-900/1800 and D-AMPS licenses for the Orenburg region, which is part of the Ural super-region.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The GSM-1800 license is held by Bee Line Samara, of which VimpelCom owns 51.0%.
|--- | -------------------------------------------------------------------------------

|(6) | In January and September 2003, VimpelCom-Region acquired 100.0% of StavTeleSot.
|--- | -------------------------------------------------------------------------------



StavTeleSot holds a GSM-900/1800 license for the Stavropol region, which is part of the North Caucasus super-region.



We have met all applicable start-of-service and line capacity
requirements for our super-regional GSM licenses. With respect to our super-regional GSM licenses for the Central and Central Black Earth, North Caucasus, Siberian and Volga super-regions, the start-of-service dates were deemed to have been met by
the services that our company rendered prior to the issuance of the licenses to VimpelCom-Region.



Our super-regional GSM licenses for the Central and Central Black Earth, North Caucasus, Siberian and Volga super-regions contain an additional
requirement that our networks cover certain specified cities by a specified date. In a non-binding clarification from the Ministry of Communications issued in December 2001, the Ministry of Communications stated that this coverage requirement could
be met by GSM-900 coverage and that no minimum number of base stations need to be installed to meet this requirement. Accordingly, we understand



52



---

##### Table of Contents

that so long as one base station is installed in each such city in the 900 MHz frequency range, the license requirement is met.



We have installed at least one 900 MHz base station that is in compliance
with all the necessary governmental permissions in each of the cities indicated in our regional licenses for the Central and Central Black Earth, North Caucasus, Siberia and Volga super-regions, except for the city of Naberezhnye Chelny in the Volga
license area. Further, we may not yet have installed base stations in those cites where start-of-service dates have been extended until December 31, 2004. We are currently in the registration stage of obtaining the necessary governmental
authorizations for our license in Naberezhnye Chelny. See Regulation of Telecommunications in the Russian Federation for a description of the licenses, approvals, certifications and/or permissions that need to be received before
the commercial launch of a wireless telecommunications network. However, as of the date of this Annual Report on Form 20-F, we have not received any notices from the Ministry of Communications, or its successor regulatory bodies, regarding this
provision of the license. The start-of-service date for Chechnya and Ingushetia under our GSM license for the North Caucasus super-region was extended for us, as well as other operators, due to certain prohibitions on providing cellular services in
Chechnya, Ingushetia and the border regions of Dagestan imposed by the Russian Federal Security Service.



We do not currently hold a GSM license for the Far East super-region of Russia. In the future, we will endeavor to gain access to operations in the Far
East.



AMPS/D-AMPS



We hold AMPS/D-AMPS licenses for the Moscow license area and eight other
geographic areas: Kaluga, Novosibirsk, Orenburg, Ryazan, Samara, Tver, Vladimir and Vologda. The population in many of the regional AMPS/D-AMPS license areas may not be commensurate with the territorial coverage requirements. In 2003, we sold the
companies that held our AMPS/D-AMPS licenses for the Karelia and Ulyanovsk regions. Currently, we are not in compliance with the territorial coverage requirements in the Ryazan, Samara and Tver license areas, and we have not met the line capacity
requirements in Ryazan, Tver and Vologda. We may not be able to, or may voluntarily decide not to, comply with the license requirements for some or all of these AMPS/D-AMPS license areas in the future. We provide AMPS/D-AMPS wireless services on a
commercial basis in all of our AMPS/D-AMPS license areas.



On
June 5, 2003, we entered into a series of agreements with ZAO InvestElectroSvyaz (which operates under the Corbina-Telecom brand name in Russia) in order to utilize excess capacity on our D-AMPS network in the Moscow license
area. We continue to operate and maintain our Moscow D-AMPS network, service our existing Moscow D-AMPS subscribers and attract new subscribers to our network. Under the terms of the agreements, Corbina-Telecom entered into a sale and capital lease
transaction for certain of our infrastructure equipment that provides for D-AMPS network functionality in the Moscow license area. Corbina-Telecom, acting as our agent, has the right to attract new subscribers to our network. The total purchase
price of the equipment was US$16.5 million (excluding VAT). Corbina-Telecom paid us one-half of the purchase price within 30 days of execution of the agreements, with the remainder to be paid by April 2004. As of December 31, 2003, Corbina-Telecom
had paid approximately US$12.4 to us under the agreements. As collateral for the amount still owed to us, Corbina-Telecom has pledged certain items of the D-AMPS equipment with the agreed pledge value of approximately US$4.1 million. In addition,
for the next four years, Corbina-Telecom will pay us service fees of US$1.0 million per year (net of the lease payments), subject to adjustment based on traffic volume.



In 2004, Gossvyaznadzor conducted an inspection of our D-AMPS operation and in a notice issued to us on March 10, 2004,
alleged that certain subscribers did not have agreements with VimpelCom. We are in the process of reviewing the subscriber agreements concluded on our behalf by Corbina-Telecom and amending any that do not correctly reflect the agency relationship.
We have requested an extension to the May 9, 2004 deadline set forth in the Gossvyaznadzor notice to provide us with sufficient time to review these agreements and make



53



---

##### Table of Contents

any amendments that might be needed, but neither Gossvyaznadzor nor its successor, the Federal Surveillance Service for Communications, have responded to our
request. For the risks associated with our failure to comply with Gossvyaznadzor notices, see the section of this Annual Report on Form 20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessIf
we are found not to be in compliance with applicable telecommunications laws or regulations, we could be exposed to additional costs or suspension or termination of our licenses, which might adversely affect our business.



Products and Services



We offer the following wireless services to our subscribers:



| |  | voice telephony service;
| | - | ------------------------



| |  | value added services using SMS, Unstructured Supplementary Services Data, or USSD, WAP, GPRS and MMS technologies;
| | - | ------------------------------------------------------------------------------------------------------------------



| |  | interconnections with other networks; and
| | - | -----------------------------------------



| |  | access to both national and international roaming service.
| | - | ----------------------------------------------------------



We offer these services to our subscribers under two types of payment plans: contract plans and prepaid plans. As of December 31, 2003, approximately
13.1% of our subscribers were on contract plans and approximately 86.9% of our subscribers were on prepaid plans.



Contract plans



We market our contract plans to high usage subscribers under the Bee Line GSM brand name. Our contract plans are offered on our GSM network.
Our contract subscribers pay a monthly fee ranging from US$1 to US$165 (before taxes), depending on the tariff plan. Contract subscribers also pay for airtime usage above any free airtime afforded to them under their particular tariff plan on a per
minute basis, ranging from US$0.09 per minute to US$0.29 per minute (before taxes). The per minute charge depends on the type of contract plan and the time of the call. In August 2000, we introduced a new tariff plan called Super GSM,
which provides for unlimited local airtime and a wide range of value added services for a monthly fee of US$180 (before taxes). In December 2003, due to the introduction of low unlimited plans by MegaFon and special offers made by MTS, we reduced
our monthly fee to US$165 (before taxes).



We also provide our
corporate and high use subscribers, including small and medium-size businesses, with a range of additional value added services, including specialized customer service, tailored pricing arrangements and access to sophisticated technical
opportunities, such as individual corporate wireless networks.



Prepaid
plans



In October 1998, we became the first wireless
service provider in the Moscow license area to offer prepaid plans. We market our prepaid plans under the Bee+ sub-brand name and offer either GSM or D-AMPS service to our prepaid subscribers. Prepaid scratch cards are denominated from
US$5 to US$100 and initially were used by subscribers within a specific period of time ranging from seven to 390 days, depending on the denomination of the prepaid scratch card. In the beginning of 2003, we introduced a balance freeze option, which
allows our subscribers to utilize unused minutes for a period of time after a balance refill. This option was introduced as an added value to our subscriber base and did not result in usage or ARPU decrease.



In the summer of 2003, we launched the Bee active campaign, the
core of which was termless payments for prepaid subscribers until the subscribers balance goes to zero. This means that our subscribers have no monthly fee, which is the main value for the mass market segment. In response to increased
competition, in September 2003, we launched a new price plan with termless payments. These initiatives led to a sufficient increase in active subscribers



54



---

##### Table of Contents

and did not result in a decrease in ARPU. As of December 31, 2003, approximately 65.0% of our prepaid subscribers operated under termless payment plans. We
expect that these plans will help decrease churn as fewer subscribers will be subject to a suspension in service when the term of their scratch-card expires.



We sell prepaid scratch cards at our sales offices as well as through a network of dealers and various retail distribution channels, such as bank
branches, restaurants, supermarkets and gas stations. Prepaid subscribers may also replenish their prepaid balances through our Beepay channels.



We designed our prepaid plans to address the needs of the mass-market subscriber segment, which is comprised of more price-sensitive subscribers. Prepaid
plans simplify the usage of wireless telephones by eliminating deposits and monthly bills and allowing subscribers to control their spending. We benefit by receiving advance payments without the need to issue invoices or monitor credit limits. As a
result, prepaid plans reduce the risk of bad debt. On average, prepaid subscribers tend to use less airtime compared to our contract subscribers. However, some high usage subscribers use our prepaid plans because of the convenience of using these
plans. As of December 31, 2003, the share of high usage subscribers (defined as a subscriber from whom we receive a monthly average revenue of more than US$40 exclusive of taxes) in the Moscow subscriber base was approximately 3.0%.



Value added services



In addition to basic wireless communications services, we currently offer a number of value added services, including
non-voice services. We offer the following value added services:



| |  | Traditional value added services.Generally, for an additional charge, we offer a variety of basic voice-related value added services, including caller-ID, calling line
identity restriction, which enables our subscribers to block their phone number, call forwarding, call waiting and conference call services. Caller-ID and our calling line identity restriction are available for all calls by our subscribers to
another number within our network. In addition, under certain circumstances, these services may be available for calls to a number outside our network.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Messaging.In 1999, we introduced SMS to our subscribers. SMS enables our subscribers to exchange short text messages with other subscribers in our network, as well as with
MTS and MegaFon subscribers in the Moscow region. Both our contract and prepaid subscribers can use SMS. In May 2002, we launched MMS on a trial basis, free of charge. With MMS, our subscribers can send and receive different types of multimedia
content, including melodies and songs, full-color images, photos, animation, postcards and digital pictures. In January 2004, we introduced a tariff for our MMS service.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Infotainment.We provide infotainment services to our subscribers through our BeeOnline portal, the first Russian portal offering personal digital services, using information
from RIA News, Finmarket, Map Maker, Prime-TASS and Gazeta.ru. In February 2003, we launched, on a trial basis, a new infotainment service, called Beepartner. Beepartner enables
vendors to deliver their information and entertainment services to Bee Line GSM subscribers via SMS.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Mobile Internet.Our various mobile Internet services give our subscribers access to the Internet and internal corporate Intranets via mobile devices, such as mobile
handsets, personal digital assistants and laptops. In 2000, we launched commercial WAP services, which enable our subscribers to connect to the Internet via a WAP-enabled mobile handset without using additional devices, such as a laptop or modem. We
launched commercial GPRS-based services on April 1, 2002. GPRS is a packet-based wireless communication service that provides for faster data rates and continuous connection to the Internet. The higher data rates allow users to take part in video
conferences and interact with multimedia Web sites and similar applications using mobile handheld devices. We currently provide both WAP and GPRS services to our contract and prepaid customers in the Moscow license area, and to some prepaid
subscribers in the regions outside of the Moscow license area. In addition, we are currently considering introducing WLAN services to our customers and intend, as an initial step, to introduce WLANs in airports, hotels and business centers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



55



---

##### Table of Contents

| |  | M-Commerce.Our M-Commerce services will enable our subscribers to purchase goods and services through mobile handsets. We intend to launch our M-Commerce services for
commercial use during 2004.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Services for our corporate and high-end users.We provide our corporate and high-end users with additional value added services, such as Fixed Mobile Convergence, or FMC,
which provides unified phone numbers for office and mobile telephones, Wireless PBX, a special virtual private network for corporate clients, access to corporate networks via GPRS, which allows users to access corporate e-mail and other resources
via mobile telephones, and corporate SMS e-mail.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Services designed to improve customer convenience.In 2001, we launched two substantial customer convenience products, known as Beepay and Beeoffice.
Beepay allows our subscribers to pay their cellular telephone bill online and to replenish their prepaid balances through convenient channels, such as shops, gas stations, dealers, ATMs and bank branches, without having to present an invoice.
Beeoffice allows our subscribers to use their mobile handsets to manage the use of our different value added services via SMS, interactive voice response, the SIM Toolkit or the Internet. We are now evaluating our use of the SIM Toolkit and
considering new technologies, such as USSD. USSD permits the transmission of information through our GSM network, which provides us with another way to offer value added services to our subscribers, including the activation of our prepaid scratch
cards and notification of remaining prepaid balances.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Loyalty
programs



Our loyalty programs are designed to retain our
existing subscribers. We take a segmented approach to retaining our customers. We offer dedicated service managers to high-revenue generating customers and various affinity programs with partners that provide our customers with a benefit for
remaining a Bee Line GSM customer. In 2002, we launched our pilot Beebonus card service. With a Beebonus card, subscribers accumulate bonus points by purchasing goods from participating vendors, which can then be used to pay for our services. In
2004, we intend to launch a Beebonus co-branding program and an internal bonus program.



Roaming



Roaming allows our subscribers and
subscribers of other wireless operators, to receive and make international, local and long distance calls while outside of their home network. Our roaming service is instantaneous, automatic and requires no additional equipment. Because GSM
interacts with other standards used by our roaming partners, GSM subscribers can make and receive calls in other locations that also operate a GSM network. As of December 31, 2003, we had roaming agreements with 307 GSM providers in 142 countries in
Europe, Asia, North America, South America, Australia and Africa. In addition, we launched GPRS roaming with 50 operators in 34 countries in Europe, Asia and North America. We have also established domestic roaming agreements with 41 regional GSM
providers in Russia, which provide roaming for our subscribers in more than 1,400 cities across Russia, including St. Petersburg. We expect to enter into additional roaming agreements around the world and in Russia.



We also have both international and domestic (TAP-file based) roaming
services for our prepaid GSM subscribers. In 2003, we were the first Russian wireless company to launch customized application for mobile network enhanced logic, or CAMEL, an intranetwork prepaid roaming service. This service allows pre-paid
subscribers to automatically receive access to roaming services with a positive balance on their accounts. We believe that CAMEL is a unique business service proposition that allows us to implement real time cost control, provide more dynamic
service to our clients and reduce bad debt.



In general, our
roaming agreements provide that when one of our subscribers uses the wireless services of a corresponding service provider, we are responsible for paying the charges for those wireless services used by our subscriber at the tariff amount specified
in the particular roaming agreement. We then charge the subscriber for the roaming expenses incurred plus a surcharge of 15.0% and the re-routing of incoming calls. In addition, we



56



---

##### Table of Contents

receive revenues from other service providers for calls made to and by their subscribers who are using our networks. In the future, we expect that our
roaming revenues from wireless users visiting the Moscow license area will increase and that our regional operations outside of the Moscow license area will account for a greater percentage of our total roaming revenues.



Handsets and accessories



Our subscribers must have a handset that can be used on our wireless
networks. Subscribers can purchase handsets from us, from a dealer or supplier or from another service provider. We do not expect to earn a significant profit on the sale of handsets and accessories. Rather, we intend to sell handsets and
accessories to help attract subscribers and ensure the supply of handsets in the marketplace. Therefore, we may offer handsets or accessories below cost as part of a sales promotion and in response to competition. In the future, we may consider
shifting our handset sales to independent dealers as the wireless market grows and dealers retail operations develop.



We currently offer GSM handsets manufactured by Sony Ericsson, Motorola, Nokia, Philips, Siemens, Alcatel and other suppliers. Consistent with our
approach to developing a dual band GSM-900/1800 network, we offer dual band GSM-900/1800 handsets, which increase the roaming ability of our GSM subscribers. In addition, we offer tri-band handsets for GSM-900/1800/1900, which allow our subscribers
to roam in the United States and Canada in areas where GSM-1900 networks are operational. We also offer WAP-enabled and GPRS-supporting handsets provided by our suppliers.



Federal Telephone Numbers



In 1998, we began offering our subscribers in the Moscow license area the option of receiving a ten digit federal telephone number as an alternative to
receiving a more expensive, local Moscow telephone number. Because our costs associated with the federal numbers are substantially lower than those associated with Moscow numbers, we can offer federal numbers on terms more attractive to
cost-sensitive subscribers. Calls using the federal telephone numbers are routed through long distance switches, but are billed as local calls to the calling parties for interconnection within the Moscow license area. In the regions, we only offer
our subscribers a ten-digit federal telephone number.



We may
soon face a shortage of federal telephone numbers. For further information on this risk, please see the section of the Annual Report on Form 20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our
BusinessWe may soon face a shortage of federal telephone numbers that are currently available to us and our access to additional federal telephone numbers is limited.



Tariffs



We offer our subscribers various tariff plans, each appealing to a specific subscriber segment and designed to fit different calling patterns. Our
principal tariff plans are marketed under our Bee Line GSM trade name. The following tables summarize the material terms of our most popular tariff plans as of December 31, 2003, excluding sales taxes and value added tax:



Tariff Plans in the Moscow License Area



|                                     |  |           |  |                  |  |            |  |             |  |             |  |                 
|------------------------------------ |  | --------- |  | ---------------- |  | ---------- |  | ----------- |  | ----------- |  | ----------------
|                                     |  | Bee+ Time |  | Prime            |  | Super 30   |  | Super 300   |  | Super 500   |  | Super GSM       
|Connection                           |  | Federal   |  | Federal or Local |  | Local      |  | Federal     |  | Local       |  | Federal or Local
|Monthly fee (US$)                    |  | None      |  | 3.00             |  | 11.00      |  | 30.00       |  | 60.00       |  | 165.00          
|Free monthly airtime for local calls |  | N/A       |  | N/A              |  | 30 minutes |  | 300 minutes |  | 500 minutes |  | Unlimited       
|Per minute, local calls (US$)        |  | 0.11-0.22 |  | 0.09-0.18        |  | 0.12-0.24  |  | 0.07-0.15   |  | 0.10-0.20   |  | N/A             



57



---

##### Table of Contents

Tariff Plans in the Regions Outside of the Moscow License Area



|                                     |  |           |  |                       |  |                 
|------------------------------------ |  | --------- |  | --------------------- |  | ----------------
|                                     |  | Bee+ Time |  | Prime                 |  | Super 100-500   
|Connection                           |  | Federal   |  | Federal / Local       |  | Federal or Local
|Monthly fee (US$)                    |  | None      |  | 1.00-3.00 / 4.25-8.00 |  | 10.00-50.00     
|Free monthly airtime for local calls |  | N/A       |  | N/A                   |  | 100-500 minutes 
|Per minute, local calls (US$)        |  | 0.05-0.24 |  | 0.03-0.22             |  | 0.06-0.12       



In addition to airtime
charges, contract subscribers pay a deposit and, if they do not already have one, a charge for the handset. We have worked closely with a number of our corporate contract subscribers to create more efficient and cost effective tariff plans and
programs tailored to their needs. All of our tariffs are quoted in U.S.-dollar equivalents.



Customer service



We
place a high priority on providing consistently high quality customer service to our subscribers. We provide customer service in both Russian and English, 24 hours a day, seven days a week. We now have customer service centers in all of our sales
offices throughout the country, including three dedicated walk-in centers in Moscow. In addition, we handle the majority of our customer contacts through six super-regional call centers. Automation has significantly improved our ability to provide
high quality customer service to our subscribers. As of March 31, 2004, we employed approximately 1,900 service representatives in our subscriber service department, as well as a varying number of personnel on temporary contracts in support
functions. Service representatives handle subscriber activation and disconnection, follow up with subscribers who are late in paying their bills and answer questions regarding equipment usage, billing and disconnection due to lack of payment. As
part of our customer relations program, our subscribers receive information through our free monthly newspaper, Bee Line World, which has a circulation of approximately three million, and other brochures sent by courier from time to
time.



Billing



In the first quarter of 2002, we installed a new Customer Care and Billing
system, called CCBS Ensemble, to support expected subscriber growth, geographic expansion and the introduction of new services. Amdocs developed CCBS Ensemble and adapted it for the Russian market. We migrated our Moscow-based subscribers to CCBS
Ensemble in March 2002 and our subscribers in the regions outside of the Moscow license area to CCBS Ensemble in 2003. The accuracy and flexibility of CCBS Ensemble are important components in our strategy to provide efficient and responsive
customer service and also permit us to generate accurate and timely subscriber information and analysis. Through CCBS Ensemble, we have integrated our billing, ordering and collection processes onto a single platform, which eliminates the need for
redundant systems and enhances our customer service. CCBS Ensemble has supported and will continue to support us in the rapid deployment of advanced next- generation services, such as online stock quotes, traffic reports and entertainment services
using mobile devices. It has also been instrumental in enabling us to become the first wireless telecommunications operator to offer commercial GPRS in Russia.



In order to reduce our exposure to ruble devaluation, all subscriber invoices specify the amount owed in U.S.-dollar equivalents and require payment in
rubles based on the exchange rate of the Central Bank of Russia on the date of payment, plus 1.0% to cover the cost of converting rubles into U.S. dollars. In 2003, wire transfers accounted for approximately 63.0% and cash payments accounted for
approximately 37.0% of total funds received. Subscribers are required to pay their bills within 25 days of the bill date. Contract subscribers have their telephone number blocked when their accounts become more than 35 days overdue and have their
wireless service terminated when their accounts become more than 60 days overdue. Service to prepaid subscribers is terminated after 180 days of inactivity. In September 2003, we introduced a new tariff plan in which subscribers are blocked after
180 days of inactivity and terminated 180 days after being blocked. We notify subscribers regarding overdue balances using SMS, letters and telephone calls. In order to reduce the risk of bad debt, we



58



---

##### Table of Contents

require prospective subscribers to provide copies of valid passports, check the potential subscriber against a list of known bad debtors and enforce credit
limits on deposits.



Marketing and Sales



Target subscribers



We separate our primary target subscribers into three large groups:



| |  | large corporate subscribers;
| | - | ----------------------------



| |  | small and medium-size business subscribers and high income individual subscribers; and
| | - | --------------------------------------------------------------------------------------



| |  | mass market subscribers.
| | - | ------------------------



We use the Bee Line GSM trade name to market our wireless services to our large corporate, small and medium-size business and high-income individual
subscribers. The typical large corporate subscriber is less price-sensitive, uses more airtime and pays on a contract basis for our wireless services. In 2002, we introduced a number of value added services for our corporate subscribers, including
GPRS mobile access to corporate networks, corporate SMS, e-mail, FMC and Beeoffice. In addition, we are considering launching WLAN services.



We use the Bee+ sub-brand name to market our wireless services to mass market subscribers. The typical mass market subscriber is more
price-sensitive, uses less airtime and prepays for our wireless services. As a result of our mass marketing efforts, combined with a growing acceptance among Russians of wireless telecommunications and declining costs associated with obtaining such
services, we are attracting a large number of subscribers from the mass market and expect this trend to continue.



We continue to invest significantly in our information technology, billing systems and customer service, including the development of call centers. We
have also implemented intelligent call routing technology, which allows us to provide specialized service to different market segments of our subscribers.



Our subscriber growth in 2003 was fueled by GSM subscribers, given the popularity of the GSM standard and our network capacity. Through our GSM network,
we are able to offer a number of advanced services to the corporate and high usage subscriber, while at the same time provide lower-priced services for the more cost-sensitive mass market subscriber.



Advertising



We advertise our services and products under the Bee Line GSM brand name, one of the most recognized brand names in Russia.
We have focused on image advertising to position the Bee Line GSM brand name as one of the leading, high quality wireless services in Russia. Further, we provide promotional information with our subscriber invoices and on our prepaid scratch cards
to inform subscribers of alternative pricing arrangements, dealer locations and new value added services targeted to specific market segments. Advertising has been placed in popular publications, in our monthly newspaper, Bee Line World,
on radio and television and via outdoor media.



We have entered
into license agreements with VimpelCom-Region for all of our registered trademarks and also license our Bee Line GSM brand name to the companies that we have acquired in the course of our national expansion. We conduct our advertising campaigns in
cooperation with our licensees to further increase the exposure of the Bee Line GSM brand name. We obtain substantial marketing benefits from the brand recognition associated with this widely used brand name, both with existing subscribers traveling
outside of our service areas and with potential new subscribers moving into our license areas. We are also coordinating the advertising policies of our dealers in an effort to capitalize on the increased volume of joint advertising and to ensure
that the integrity and high quality image of the Bee Line GSM brand name is preserved.



59



---

##### Table of Contents

Distribution and marketing



As of December 31, 2003, we had the largest distribution network for wireless services in the Moscow license area, with 74
independent dealers and 3,704 points of sale, and approximately 6,500 locations where our prepaid scratch cards could be purchased. In addition, as of December 31, 2003, we had approximately 1,350 independent dealers and more than 8,850 points of
sale in the regions. Our retail distribution channel for prepaid scratch cards includes large chains of electronic stores and other consumer retail stores and selected branch offices of banks, including Sberbank. We also own three sales offices in
the Moscow license area, and have established at least one sales and customer care office in each region outside of Moscow where we operate. In the first quarter of 2001, we acquired the Mobile Center dealer network, one of the largest
retail dealer networks in Moscow, for approximately US$3.2 million. This acquisition added 12 additional offices to our distribution network. As of December 31, 2003, we had 37 Mobile Center sales offices in the Moscow license area. In
2002, we established a telesales group to target potential corporate customers and to assist them in becoming subscribers. We also employ a direct sales force that focuses on sales to corporate and high usage subscribers. Our distribution and
marketing efforts focus on controlling product and corporate image, ensuring brand usage and implementing marketing policies at all points of sale.



In 2000, approximately 82.0% of our new subscribers enrolled through independent dealers, while approximately 18.0% enrolled directly with us. In 2001, we
expanded the number of points of sale at which our services and products are offered, increasing the percentage of direct sales to approximately 30.0%. In 2002, our distribution strategy focused on making our products more affordable and available
to potential new subscribers. As a result, we attracted a larger mix of mass-market subscribers, a greater proportion of which tend to enroll with us through independent dealers as compared to our corporate and high-end customers, most of which
enroll directly with us. In turn, the percentage of subscribers that enrolled directly with us decreased to approximately 11.0% in 2002. In 2003, approximately 8.8% and 91.2% of our sales in the Moscow license area were made directly through our
sales force and independent dealers, respectively. In 2003, approximately 15.3% and 84.7% of our sales in the regions were made directly through our sales force and independent dealers, respectively.



Dealer commissions have been declining since August 2000. As of March 31,
2004, dealer commissions in the Moscow license area ranged between US$30.00 and US$120.00 for new contract subscribers and were approximately between US$25.00 and US$27.00 for each prepaid subscriber. Average dealer commissions are lower in the
regions outside of the Moscow license area and, as of March 31, 2004, ranged between US$25.00 and US$55.00 for new contract subscribers and were approximately US$11.00 for each prepaid subscriber. As a result of the increase in the number of prepaid
subscribers, we are paying lower average dealer commissions per subscriber. Furthermore, our acquisition of the Mobile Center network has enabled us to reduce commissions. Despite the lower average commissions per subscriber, we believe
that we enjoy a good relationship with our dealers. We believe that our prompt and accurate payments to dealers, our timely delivery of products and services and our dealer relationship policies provide us with an advantage over our competitors.



Our marketing efforts are based on the coverage and quality of
our GSM network, our network capacity and our product innovations. These efforts include the introduction of our popular Super GSM plan for high usage subscribers with a flat monthly fee of US$165.00 (before taxes), unlimited local
calls, fixed-mobile-convergence based products for corporate subscribers, location-based services, a variety of services using WAP technology and the BeeOnline portal.



Wireless Network Equipment and Operations



Wireless network infrastructure



GSM technology is based on an open architecture, which means that equipment from any supplier can be added to expand the initial network. Our
GSM and GPRS networks, which use Alcatel, Ericsson and Nokia equipment, are integrated wireless networks of base station equipment and digital wireless switches connected by fixed microwave transmission links, fiber optic cable links and leased
lines. As of December 31, 2003, we had



60



---

##### Table of Contents

2,373 GSM base stations, 116 base station controllers and 11 switches for our dual band GSM network in the Moscow license area, covering approximately 47,000
square kilometers. Our GSM network in the Moscow license area currently has a capacity of approximately 6.9 million subscribers. We also had 4,224 GSM base stations, 111 base station controllers and 39 switches for our dual band GSM network in the
regions outside of the Moscow license area, covering approximately 1,000 square kilometers, as of December 31, 2003.



In 2004, our network development in the regions will focus on significantly expanding network coverage in suburban areas, along key roads and in vacation
areas, as well as on adjusting our current network capacity to meet planned subscriber growth and network quality targets. At the same time, in the Moscow license area we intend to focus our network development on expanding our indoor coverage, more
rapidly adjusting our network capacity to changing market demands and upgrading to new products.



We have designed and put into operation BeeNet, our fiber optic network designed to connect base stations to the switches of our GSM and
D-AMPS networks in the Moscow license area and in the regions. Our fiber optic network has grown to 200 telecommunications nodes to which virtually all base stations are connected either directly or through telecommunications nodes to which base
stations or base station controllers are connected. As of December 31, 2003, we had approximately 3,350 square kilometers of fiber optic cable. The development of our fiber optic network was planned in accordance with the expansion plans for our GSM
networks, including our networks in the regions. Our fiber optic network is intended to help us resolve transmission capacity problems, increase reliability and quality and be independent from the suppliers of transmission lines. To the extent
excess capacity is available on our fiber optic network, we lease the excess capacity to third parties. In 2002 and 2003, our revenues from leasing excess fiber optic capacity were approximately US$1.8 million and US$1.3 million, respectively.



Site procurement and maintenance



We enter into agreements for the location of base stations in the form of
either leases or cooperation agreements that provide us with the use of certain space for our base stations and equipment. Under these leases or cooperation agreements, we typically have the right to use premises located in attics or on top floors
of buildings for base stations and space on roofs of buildings for antennas. In exchange, we pay the lessor or provide it with mobile telephones with a specified amount of free usage or a combination of both. We do not believe that we will have
difficulty obtaining rights to space for future base stations, or replacing current sites, if necessary, on terms acceptable to us.



In order to provide stable and error-free operation of our wireless networks, our maintenance personnel perform daily software and database integrity
checks. Base stations are inspected on a rotational basis every three months. The base station inspection includes checking the battery, power supply and combiners.



Interconnect arrangements



We need access to a wireline network to enable our subscribers to initiate calls to, and to receive calls from, persons using wireline networks. Our
interconnect agreements provide us with this access. We have interconnect agreements with several wireline service providers in the Moscow license area and in the regions outside of the Moscow license area, including Combellga, Komet, MTT,
MTU-Inform, Rostelecom, RusSDO, Sovintel and Telmos. In Moscow, our interconnect agreements allow us to connect to the public switched network of Moscow operated by MGTS and to provide long distance and international services. We also have
interconnect agreements with telecommunications providers in the Central and Central Black Earth, North Caucasus, Northwest, Siberian, Ural and Volga license areas that enable our subscribers to initiate calls to and receive calls from the public
switched telephone networks in the regions of Russia.



Pursuant
to our interconnection arrangements, we pay for the use of local number capacity and traffic. As of December 31, 2003, we were using over 220,000 local Moscow numbers. We will purchase additional telephone



61



---

##### Table of Contents

line capacity in the Moscow license area as needed to the extent available. Payment for Moscow telephone lines involves an initial one-time fee of
approximately US$80 per line as of December 31, 2003, an average monthly fee per line, which does not exceed US$6, and an average traffic fee for local calls based on usage of approximately US$0.06 per minute. The use of federal numbers involves a
traffic fee based on usage of US$0.01 per minute for local calls and does not require a monthly fee or the purchase of line capacity.



In the regions outside of the Moscow license area, we also use local numbering capacity. Payment for local telephone line capacity in the regions involves
an initial one-time fee of approximately US$70 per line and traffic fees for local calls.



Handset suppliers



We
sell dual mode GSM-900/1800, dual mode AMPS/D-AMPS and tri-band GSM handsets manufactured by companies such as Siemens, Nokia, Motorola, Sony Ericsson, Ericsson, Alcatel, Panasonic, Samsung and LG. Alcatel and Nokia provide training to our sales
force, dealers and engineering staff as well as cooperate with us on marketing and promotion. We have signed agreements with Sony Ericsson, Motorola, Philips, Alcatel and Nokia that allow us to establish service centers in order to reduce the amount
of time that a handset is out of service. We also intend to enter into agreements with Siemens, Samsung and LG this year for the repair of their handsets in our service centers.



Competition



We have a significant number of competitors and we expect competition in the Russian wireless industry to intensify in the future as a result of new
market entrants, consolidation in the industry, the growth of current operators and new technologies, products and services. In particular, competition in the Moscow license area and in certain regions is intense. Providers are utilizing new
marketing efforts to retain existing subscribers and attract new ones, including lowering tariffs and offering handset subsidies. We compete with at least one other wireless operator in each of our license areas and in many license areas, we compete
with two or more wireless operators.



We compete to attract and
retain subscribers principally on the basis of:



| |  | brand identity;
| | - | ---------------



| |  | price;
| | - | ------



| |  | quality of service;
| | - | -------------------



| |  | network coverage;
| | - | -----------------



| |  | value added services
| | - | --------------------



| |  | enhancements offered; and
| | - | -------------------------



| |  | subscriber services.
| | - | --------------------



Moscow license area



MTS.Our primary competitor in the Moscow license area, MTS, initiated GSM service in Moscow several years before we did. Consequently, we spent considerable resources building our GSM-900/1800 network in 1999 and 2000 to reach a
comparable level of service and coverage. MTS has a larger subscriber base and a greater share of the high usage subscriber market and frequency allocations, which provides MTS with a potential advantage in the quality of its GSM-900 service.
Deutsche Telekom AG, a telecommunications company with significant telecommunications assets and experience, recently reported that it beneficially owns 25.0% of MTSs voting shares. Sistema, a diverse Russian holding company with interests in
several telecommunications companies, recently reported that it beneficially owns 51.0% of MTSs voting shares. Because of its strategic relationships with Sistema and Deutsche Telekom, MTS may have access to greater financial resources than
our company in the future. According to AC&M Consulting, as of December 31, 2003, MTSs subscriber market share in the Moscow region was approximately 43.0%, compared to our subscriber market share of approximately 49.0%.



62



---

##### Table of Contents

Sonic Duo.In the Moscow license area, we also compete with Sonic Duo, a wholly-owned subsidiary
of MegaFon. MegaFon was formed on May 29, 2002, with the intention of merging nine regional mobile phone operators. MegaFons shareholders include Telecominvest and TeliaSonera, the leading telecommunications group in the Nordic and Baltic
regions. Sonic Duo received a dual band GSM-900/1800 license for the Moscow license area in May 2000, began providing roaming services in Moscow to subscribers of other wireless operators in the third quarter of 2001 and commenced operations in
Moscow in late November 2001. Sonic Duo markets its services in Moscow under the MegaFon brand name. According to AC&M Consulting, as of December 31, 2003, Sonic Duo had approximately 850,300 subscribers in the Moscow region, representing
approximately 7.4% of the market. Sonic Duo has aggressively lowered tariffs in an effort to attract more subscribers, resulting in an average price per minute that is approximately 25.0% to 30.0% lower than other GSM operators.



Other competitors in the Moscow license area.Open Joint Stock Company
Moscow Cellular Communications, or MCC, which operates an analog NMT-450 network, was the first wireless service provider in the Moscow license area, commencing operations on a limited basis in December 1991. MCCs shareholders
include Rostelecom, MGTS and the Russian Telecommunications Development Company. According to our estimates, as of December 31, 2003, MCCs subscriber market share for the Moscow license area was approximately 0.4%. In March 2000, the Ministry
of Communications issued an approval to MCC to build a CDMA network in the Moscow license area in the 450 MHz frequency band. In December 2003, MCC started commercial operations of its IMT-MC (CDMA-450) network under the SkyLink brand.
For now, CDMA-450 operators have a very limited spectrum of subscriber terminals, poor coverage and almost no financing (compared to GSM operators). Therefore, we do not expect a significant competitive threat from CDMA operators in 2004-2005.



JSC Personal Communications, which operates under
the brand name Sonet, holds a license to operate fixed wireless CDMA services in the Moscow license area in the 800 MHz frequency range. The Ministry of Communications has stated that Sonets license is for fixed wireless service
only and does not permit building a mobile wireless network. In the event that Sonets license is amended to allow mobile wireless service, Sonet could become a potential competitor of ours in the Moscow region. Sonets market share was
0.5% as of December 31, 2003.



Other license areas



MTS, MegaFon and their affiliates are our main competitors in the regions
outside of the Moscow license area. MTS has reported that it holds licenses to operate wireless networks in areas populated by approximately 169.2 million people in 60 regions of Russia, as well as Belarus and Ukraine. MegaFon reportedly holds
licenses covering 100.0% of the population of the Russian Federation. However, due in part to the existing distribution of licenses, these companies do not operate in all regions in which we operate, and we do not operate in all regions in which MTS
and MegaFon operate or will operate. As of December 31, 2003, we had approximately 5.8 million subscribers in the regions. By comparison, as of December 31, 2003, MTS reportedly had approximately 8.5 million subscribers in the regions and MegaFon
reportedly had approximately 5.5 million subscribers in the regions.



We compete for GSM subscribers with MTS and MegaFon in almost all of the super-regions. We also compete for GSM subscribers with local GSM, D-AMPS and CDMA operators in the regions. For instance, we compete with SMARTS, a company that holds
licenses, either directly or indirectly through joint ventures, for GSM-900 networks in the Volga license area and in certain parts of the Central and Central Black Earth license area. We also compete with Volga-Telecom in Nizhny Novgorod and some
other cities in the Volga area and UralSvyazinform in the Ural region. Tele2 also launched several networks in North-West, Siberia and some other regions. Recently, we also started to face competition from CDMA-450 operators, working under the
SkyLink brand.



It was also recently reported in
the press that in 2003 Svyazinvests revenue from subsidiaries providing wireless telecommunications services grew by approximately 80.0% making it the fourth largest cellular operator in Russia. Svyazinvest is a telecommunications holding
company in which the Russian government currently



63



---

##### Table of Contents

holds an interest of 75.0% minus one share. According to Svyazinvest, it had approximately 2.3 million cellular communications users in 2003.



New technology



Potential users of wireless networks may find their telecommunications needs satisfied by other current and developing
technologies, particularly in the broadband wireless services sector. In the future, wireless services, including wireless data services, may also compete more directly with traditional wireline services and with IP protocol telephony, both wireline
and wireless.



Third generation, or 3G, wireless technologies
are beginning to be implemented in many countries. 3G technologies, including UMTS, are considered significantly superior to existing second generation standards, such as GSM and, therefore, are likely to become competing technologies in the future.
The Ministry of Transport and Communications is working on a regulatory framework for 3G services in Russia. Association-3G, an industry group charged with advising the Ministry of Transport and Communications on the procedure for allocating 3G
licenses, has proposed that our company, MTS and MegaFon each be issued a 3G license, and that a fourth license be issued to a fourth operator; however, there can be no assurance that 3G licenses will be issued based on this recommendation. Our
company, MTS and MegaFon have each tested 3G networks in Russia. MegaFon and our company continue to run 3G test systems.



CDMA may also become a competing technology for mobile data services. The Ministry of Communications has granted licenses based on CDMA technology in the
800 MHz and 450 MHz bands for the provision of mobile wireless services in a number of regions throughout Russia.



Seasonality



Our business is subject to certain seasonal effects. Specifically, sales of our contract and prepaid tariff plans tend to increase during the December
holiday season, and then decrease in January and February. Our marketing efforts during periods of decreasing sales help to offset these seasonal effects. As with contract and prepaid tariff plan sales, minutes of use per subscriber also typically
decreases in January and February. Our roaming revenues increase significantly from June to September, when many of our subscribers are traveling to vacation destinations outside of our network. Roaming on our network by subscribers of other
networks tends to decrease during the December holiday season.



Intellectual
Property



We rely on a combination of trademarks, service
marks and domain name registrations, copyright protection and contractual restrictions to establish and protect our technologies, brand name, logos, marketing designs and Internet domain name. We have registered and applied to register certain
trademarks and service marks with the Russian Agency for Patents and Trademarks in connection with our wireless telecommunications businesses.



Our registered trademarks and service marks include our brand name, logos and certain advertising features. With respect to domain names, we have
registered the vimpelcom.com domain name with Network Solutions, which is one of the principal domain name registration services for the Internet. We have also registered the vimpelcom.ru, beeline.ru,
beelinegsm.ru, beeonline.ru, beeplus.ru and certain other domain names with the Russian Scientific Research Institute on Development of Public Networks. Our copyrights are principally in the area of computer
software for service applications developed in connection with our wireless and wireline network platform. We have copyrights to some of the designs we use in marketing and advertising our wireless services in Russia.



As part of our commitment to expanding our operations in the regions outside
of the Moscow license area and in connection with Alfa Groups investment in our company and VimpelCom-Region, we entered into a series of trademark license agreements with VimpelCom-Region for our registered trademarks, including Bee



64



---

##### Table of Contents

Line, Bee Line GSM and Bee+ in both the English and Russian languages. These agreements give VimpelCom-Region the exclusive right to use these trademarks,
for a nominal fee, within the Russian Federation outside of the Moscow license area for as long as our trademark registrations with the Russian agency for patents and trademarks are in effect, unless earlier terminated pursuant to the terms of these
agreements. These agreements also allow VimpelCom-Region to sublicense the licensed trademarks to certain of its dealers and subsidiaries, to advertise its goods and services in the Russian Federation outside of the Moscow license area and to carry
out its brand-building advertising in a manner consistent with our brand guidelines.



Properties



Our principal place of business is
in a series of five buildings consisting of approximately 24,000 square meters that we own at 10 Ulitsa 8 Marta in Moscow. We use these buildings as an executive, administrative and sales office, warehouse and operating facility. The main switches
for our D-AMPS network are also located at this site. In addition, we own a series of six buildings on Lesnoryadsky Pereulok in Moscow, constituting approximately 15,000 square meters, that are used as administrative offices and warehouse and
operating facilities and that house the main switches for our Moscow GSM-900/1800 network. We also own a portion of a building in the center of Moscow on Ulitsa 1st Tverskaya-Yamskaya consisting of approximately 3,000 square meters that we use as a
sales and administrative office and subscriber service center. As collateral for our credit lines, we have pledged to Sberbank five of the buildings on Lesnoryadsky Pereulok, our office on Ulitsa 1st Tverskaya-Yamskaya and we will be required to
pledge additional assets, including the five buildings on 10 Ulitsa 8 Marta.



We also own office buildings in some of our regional license areas and lease space on an as-needed basis.



The table below sets forth our GSM network switches as of December 31, 2003. Each of our network switches are in commercial operation except for four of
our GSM switches in Moscow and our GSM switches in Samara, Kemerovo and Norilsk.



|                                |  |                            
|------------------------------- |  | ---------------------------
|License Areas                   |  | Number of Switches         
|Moscow                          |  | 7 (plus 2 transit switches)
|Central and Central Black Earth |  | 11                         
|North Caucasus                  |  | 8                          
|Northwest                       |  | 2                          
|Volga                           |  | 9                          
|Siberian                        |  | 7                          
|Ural                            |  | 2                          



As of December 31,
2003, we had 39 switches for our regional GSM networks with base station equipment as follows:



|              |  |                   |  |                          |  |                                        
|------------- |  | ----------------- |  | ------------------------ |  | ---------------------------------------
|              |  | GSM Base Stations |  | Base Station Controllers |  | Territorial Coverage(square kilometers)
|Total regions |  | 4,224             |  | 111                      |  | 1,037,200                              



We believe that our
properties are adequate for our current needs and that additional space will be available as needed.



Legal Proceedings



On
January 9, 2004, KB Impuls officially received a notice dated December 30, 2003 from Moscow Gossvyaznadzor containing a provision that raised issues regarding the adequacy of the documentation of the agency relationship pursuant to which our company
acts as KB Impulss agent for concluding agreements with



65



---

##### Table of Contents

KB Impulss Moscow GSM subscribers. In the relevant notice provision, Moscow Gossvyaznadzor used certain technical drafting issues in the subscriber
agreement and the agency agreements as a basis for asserting first, that KB Impuls does not have any agreements with subscribers and, therefore, has violated Russian law, and second, that our agency agreement with KB Impuls does not specifically
provide that we will sign subscriber agreements on behalf of KB Impuls, also in violation of Russian law. The notice did not specify the remedial action to be taken and requests to the authorities for clarification on action to be taken by KB Impuls
were not answered. The notice specified that the violations in this provision were to be cured by February 1, 2004. Notwithstanding this uncertainty and our belief that there were no violations of Russian law, in January 2004, we amended our form of
subscriber agreements concluded on behalf of KB Impuls and we amended our agency agreement with KB Impuls in an attempt to address concerns raised by Moscow Gossvyaznadzor. However, due to the lack of clarification, there can be no assurance that
such amendments would be deemed to have cured any violations alleged by Moscow Gossvyaznadzor.



KB Impuls challenged the provision in the Moscow Gossvyaznadzor notice that questioned the agency relationship between KB Impuls and our company and on March 18, 2004, the Moscow Arbitrazh Court ruled in favor of KB
Impuls and invalidated the relevant provision of the December 30, 2003 notice. Moscow Gossvyaznadzor attempted to involve the Moscow Prosecutors office in the case, but this motion was defeated. On April 28, 2004, we received the appeal of
this ruling filed by Moscow Gossvyaznadzor on April 23, 2004. Moscow Gossvyaznadzor has publicly stated that it has never lost a case regarding a notice it has issued. We cannot assure you of a favorable outcome to this dispute. If Moscow
Gossvyaznadzor were to prevail in the appeal, it is unclear whether steps already taken would be deemed to have cured the alleged violations, what steps we would be required to take in order to cure the alleged violations and whether we could do so
within the time period to be allocated to us. As of the date of this Annual Report on Form 20-F, claims by subscribers based on similar arguments to those used by Moscow Gossvyaznadzor with respect to our agency relationship with KB Impuls have been
heard in different courts. If we are ultimately found to have violated Russian law in connection with our agency relationship with KB Impuls, KB Impulss GSM license for the Moscow license area may be suspended or terminated, we may face
additional lawsuits from subscribers and other parties on a similar basis, VimpelCom may be unable to receive revenue on behalf of KB Impuls from subscribers in the Moscow license area and our business would be materially adversely affected.



On February 4, 2004, our company received a resolution issued
by the Moscow Prosecutors office declaring the initiation of a criminal case stemming from allegations by a small Moscow-based company that claimed that we operated our business in Moscow and the Moscow region without a license. We immediately
appealed the move by the Moscow Prosecutors office and subsequently received an official notice from the Moscow Prosecutors office stating that because there was no basis for the case against us, that the case had been dismissed. The
company that initially made the allegations has filed an appeal of this decision and we cannot assure you that the decision to dismiss the criminal case will be upheld on appeal. In addition, there is no assurance that there will be no other
criminal investigations launched into the activities of our group. Criminal investigations into our activity may have a material adverse effect on our business.



Several subscribers have filed civil suits against our company and KB Impuls challenging our agency relationship with KB Impuls, claiming that
VimpelCom provides telecommunications services without a license in Moscow and the Moscow region and/or claiming that their subscriber agreements should be terminated and that they should be compensated for all amounts paid to us. The former
Ministry of Communications was brought into certain of these suits as a third party and has assisted the subscriber in each of the cases in which it is involved. In addition, there have been attempts to bring other parties into these cases,
including other regulatory bodies, but to date, these motions have been defeated. We have successfully defended our agency relationship against claims by a subscriber in one court in the City of Moscow (as well as in the Moscow Arbitrazh Court in
the case with Moscow Gossvyaznadzor described above), but a court in the City of Chekhov in the Moscow region ruled in favor of a subscriber, terminating the subscribers agreement with us on the basis of, among other things, the argument that
there is no agency relationship between VimpelCom and KB Impuls and that VimpelCom was unjustly enriched when it accepted payments from subscribers on behalf of KB



66



---

##### Table of Contents

Impuls. In that case, we were not ordered to make any payments to the subscriber and the subscriber has appealed the portion of the ruling denying his claim
for reimbursement of fees paid by him and damages. We plan to appeal the Chekhov courts ruling. Furthermore, certain claims have not yet been heard and other claims remain subject to further appeal. We cannot assure you that we will ultimately
prevail in these cases or in the appeal of the Chekhov courts ruling, or that other subscribers or parties will not bring additional cases in different courts that could apply different interpretations of the law on these issues. Although the
monetary value of each claim currently pending may not be material, our business may be adversely affected if management is forced to focus its attention and the companys resources toward defending the company against these and similar claims,
should they arise. Additionally, if the courts ultimately rule against us in any of these cases, we may be subject to future claims by other subscribers or third parties on similar grounds or on the basis of different arguments, causing management
to expend additional time and resources to resolve such claims which may ultimately have a material adverse effect on our business and results of operations. In addition, the tax authorities and other regulatory bodies may also file claims against
us if, among other things, our subscriber agreements are declared invalid.



Additionally, several subscribers have filed claims against us alleging that we have engaged in fraudulent advertising, and that the quality of our telecommunications services is not acceptable. Certain subscribers
have also filed similar complaints with the anti-monopoly authorities and the communications regulatory bodies, as well as complaints with these bodies alleging that their rights were violated as a result of our relationship with KB Impuls. There is
reportedly coordination among some of these subscribers, as well as with the company that made allegations leading to the initiation of the criminal case. To date, we have prevailed in all cases for which decisions have been taken, except in the
case noted above, but some or all of these decisions may be appealed and other cases have not yet been decided. We cannot assure you that the decisions taken by the courts in the future will be in our favor and adverse decisions may have an adverse
effect on our group.



We are also involved in various lawsuits
and claims incidental to our business, including disputes with the Russian tax authorities. In our opinion, the ultimate liabilities, if any, resulting from these lawsuits, claims and disputes incidental to our business will not materially affect
our business, financial position or results of operations.



To
date, we have no provision in our accounts for any of the matters described above.



67



---

##### Table of Contents

THE RUSSIAN TELECOMMUNICATIONS INDUSTRY



Overview



Since the early 1990s, the Russian telecommunications industry has grown rapidly as a result of increased demand from
individuals and newly created private businesses. During the Soviet era, public telecommunications was not a priority for the government and the public telephone network was poorly maintained. Trade restrictions also limited access to advanced
Western technology. As a result, most standard Russian telecommunications equipment is obsolete. Many Russian telephone exchanges are electromechanical and most telephones still use pulse dialing.



In the first half of the 1990s, the telephone administration in each region
in Russia was converted into a separate joint stock company, creating approximately eighty-nine regional operators and Open Joint Stock Company for Long Distance and International Communications Rostelecom, which we refer to in this
Annual Report on Form 20-F as Rostelecom. Rostelecom provides telecommunications services in the Moscow license area and throughout Russia. The government controlled interests in most of these regional operators and subsequently placed them in a
holding company called Svyazinvest, in which the Russian government currently holds an interest of 75.0% minus one share. The government has announced its intention to privatize an additional portion of Svyazinvest shares, perhaps in 2004. During
2002 and 2003, the regional operators were consolidated into seven super-regional operators (not including the city of Moscow), with a view of making them more attractive to investors and facilitating their capacity to raise financing for upgrading
infrastructure and improving service. In addition to its fixed line holdings, Svyazinvest also has holdings in certain cellular operators.



The fixed line telecommunications market in Moscow is dominated by MGTS. MGTS is the largest regional wireline service provider in Russia and offers local
telephone services in Moscow. As of December 31, 2003, MGTS reportedly had approximately 4.2 million subscribers. Although MGTS and Rostelecom are natural monopolies, a number of digital overlay network providers based in Moscow compete directly
with the existing incumbents. Some of these competing providers have affiliations with MGTS or Rostelecom. These providers offer high quality local, domestic and international long distance telecommunications services through their networks and
leased channels.



The Russian economy has significant unmet
demand for both wireline and wireless telecommunications services. According to industry analysts, Russia had a wireline penetration rate of approximately 24.0% as of the beginning of 2003. Svyazinvest has reported that, as of the end of 2003, it
had a waiting list of approximately 3.5 million people. In comparison, according to industry analysts, wireline penetration rates were approximately 36.0% in Hungary and the Czech Republic, approximately 59.0% in Western Europe and approximately
66.0% in the United States as of the beginning of 2003. Wireline density in Russia varies geographically.



As of the end of 2003, we estimate that the City of Moscows wireline density was approximately 65 lines per 100 people, compared to approximately 24
lines per 100 people throughout Russia.



The Russian Wireless
Telecommunications Market



Significant opportunity for
growth exists in the Russian market for wireless telecommunications services. Unmet demand and the lack of a highly developed telecommunications infrastructure in Russia have created numerous opportunities for wireless service providers, including
offering wireless services as the primary form of telecommunications services in areas where wireline service is inadequate, particularly in the Russian regions. In 2003, Russia was the second fastest growing wireless service market in the world in
terms in the number of subscribers. During the last three years, Russia has experienced estimated growth of 142.0%, 131.0%, 124.0% and 100.0% in 2000, 2001, 2002 and 2003, respectively, according to AC&M Consulting and Credit Suisse First
Boston, independent news and information services providers specializing in the Russian wireless telecommunications markets. AC&M Consulting and Credit Suisse First Boston also estimate that as of



68



---

##### Table of Contents

December 31, 2003, Russia had an overall wireless penetration rate of approximately 25.0%. We estimate that as of December 31, 2003, the wireless penetration
rate was 67.6% in the Moscow license area and approximately 19.3% in the regions of Russia outside of the Moscow license area and St. Petersburg. In comparison, it is estimated that wireless penetration rates in the Moscow license area is close to
the rates achieved in certain Western European countries, including France, where the estimated penetration rate was 69.4% as of December 31, 2003, but lower than in the United Kingdom and Italy, where penetration rates were 91.6% and 97.9%,
respectively, as of December 31, 2003. In Eastern Europe, wireless penetration rates range from 43.8% in Poland to 74.4% in Hungary and 92.8% in the Czech Republic as of December 31, 2003. The table below indicates the number of subscribers, the
wireless penetration rates and the annual subscriber growth rates for the period from 1999 through 2003 for each of Russia (based on estimates of AC&M Consulting and Credit Suisse First Boston) and the Moscow license area (based on our
estimates).



|                        |  |             |  |                     |  |                        |  |             |  |                  |  |                       
|----------------------- |  | ----------- |  | ------------------- |  | ---------------------- |  | ----------- |  | ---------------- |  | ----------------------
|                        |  | Russia      |  | Moscow License Area
|Year ended December, 31 |  | Subscribers |  | Penetration Rate    |  | AnnualSubscriberGrowth |  | Subscribers |  | Penetration Rate |  | AnnualSubscriberGrowth
|1999                    |  | 1,355,000   |  | 0.9%                |  | 82.1%                  |  | 785,000     |  | 5.2%             |  | 179.4%                
|2000                    |  | 3,445,000   |  | 2.4%                |  | 154.2%                 |  | 1,993,600   |  | 13.3%            |  | 154.0%                
|2001                    |  | 8,040,000   |  | 5.5%                |  | 133.4%                 |  | 4,110,200   |  | 27.4%            |  | 106.2%                
|2002                    |  | 18,005,000  |  | 12.4%               |  | 123.9%                 |  | 7,201,400   |  | 42.4%            |  | 75.2%                 
|2003                    |  | 36,230,000  |  | 25.0%               |  | 101.2%                 |  | 11,487,300  |  | 67.6%            |  | 59.5%                 



We expect several key
factors to drive the growth in the number of wireless subscribers in Russia and the Moscow license area in the near future, including the following:



| |  | Continued expansion of the Russian economy should underpin the continuing growth in Russian per capita GDP and corresponding increases in net disposable per capita income. We expect
this trend to be particularly evident in the regions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Declining costs, including connection costs, prices of handsets, initiation deposits and tariffs, are expected to make wireless services more affordable to the mass market
subscriber segment;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Significant advertising, marketing and distribution activities are expected to lead to increasing public awareness of, and access to, the wireless telecommunications market; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Improving service quality, expanding coverage and an increasing range of value added services, coupled with the introduction of wireless Internet technology and information and
content delivery, will drive the higher use of, and greater demand for, non-voice wireless services.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Federal Surveillance Service for Communications issues certain telecommunications licenses and maintains control over the licensing of GSM, AMPS,
CDMA, NMT-450 and, in the future, 3G networks. Wireless telecommunications standards are either federal or regional standards. In most license areas, the former Ministry of Communications has issued licenses for two or three competing wireless
telecommunications standards and has licensed at least two or three competing GSM wireless telecommunications service providers.



| |  | The former Ministry of Communications designated GSM, NMT-450 and IMT-MC-450, also known as CDMA-450, as federal standards and issued certain GSM, NMT-450 and CDMA-450 licenses.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The former Ministry of Communications initially issued GSM licenses on a region-by-region basis, but then modified this practice and issued GSM licenses for large geographical
areas, or super-regions, covering several regions.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | As of the end of 2003, according to our estimates, the Ministry of Communications had issued 111 GSM licenses, of which 21 GSM licenses are for eight regions covering large
geographical areas. We hold seven of the 21 GSM licenses that cover super-regions, including our GSM license for the Moscow license area.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





69



---

##### Table of Contents

| |  | The former Ministry of Communications designated AMPS as a regional standard, which allows local governments to participate in the development of telecommunications within their
jurisdictions. Previously, the government of each region in Russia established licensing guidelines for AMPS and recommended licensees to the Ministry of Communications. Once the selection process was complete, the licenses were subject to the same
federal regulations as all other telecommunications licenses. As of the end of 2003, according to our estimates, the Ministry of Communications issued 67 AMPS/D-AMPS licenses, 9 of which we hold. The Ministry of Communications has announced that as
of 2010 it may reallocate frequency that is currently used by AMPS/D-AMPS license holders for other purposes.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Ministry of Transport and Communications has not yet finalized procedures for issuing licenses for 3G wireless networks with a frequency range of 1.9 to 2.1 GHz. Under Russian
law, licenses to provide mobile telecommunications services on a frequency greater than 1800 MHz must be issued by competitive tender. Association-3G, an industry group charged with advising the former Ministry of Communications on the procedure for
allocating 3G licenses, has proposed that we, MTS and MegaFon each be issued a 3G license, and that a fourth license be issued to a fourth operator. Although the former Ministry of Communications was expected to announce the license allocation
procedure during the second half of 2002 and issue the licenses during 2003, no allocation procedures have been announced to date.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Wireless Technology



Overview



Wireless
networks use a variety of radio frequencies to transmit voice and data. Broadly defined, the commercial wireless telecommunications industry includes one-way radio applications, such as paging or beeper services, and two-way radio applications, such
as wireless services, personal communications services, or PCS, and enhanced specialized mobile radio services. Since the introduction of commercial wireless services in 1983, the wireless telecommunications industry has experienced dramatic
worldwide growth. According to EMC, an independent research and publishing company specializing in the wireless telecommunications industry, the number of global wireless subscribers was approximately 1.4 billion as of March 2004.



Wireless service is currently the predominant form of commercial mobile
wireless voice telecommunications service. Wireless networks have historically been analog-based systems, which use one continuous electronic signal that varies in amplitude or frequency over a single radio channel. However, over the last several
years, wireless service providers have deployed digital service in most major metropolitan markets worldwide and in many rural and sparsely-populated areas. Digital systems convert voice or data signals into a stream of digits that is compressed
before transmission, enabling a single radio channel to carry multiple, simultaneous signal transmissions. This compression process increases the capacity of the wireless networks. This enhanced capacity, along with enhancements in digital
protocols, allows digital-based wireless technologies to offer new and enhanced services, such as greater call privacy, better fraud control, SMS and more complex data transmission features, including facsimile, e-mail, Internet and data network
access.



Wireless networks are divided into multiple geographic
coverage areas, known as cells. Each cell contains a transmitter, a receiver and signaling equipment. It is collectively known as the cell site. Microwave or wireline telephone circuits connect the cell site to a switch that uses computers to
control the operation of the wireless network for the entire service area. The computers control the transfer of calls from cell to cell as a subscribers handset travels, coordinates calls to and from handsets, allocates calls among the cells
within the network and connects calls to the local wireline telephone networks or to a long distance carrier. Because the signal strength of transmission between a handset and a cell site declines as the handset moves away from the cell site, the
switching office and the cell site monitor the signal strength of calls in progress. When the signal strength of a call declines to a predetermined level, the switching office may hand-off the call to another cell site where the signal strength is
stronger. Cells are typically designed on a grid, although terrain factors, including natural and man-made obstructions, signal coverage patterns and capacity constraints may result in irregularly shaped cells and overlaps or gaps in coverage.



70



---

##### Table of Contents

The design, structure and operation of wireless networks require various supplemental arrangements in
order for wireless service providers to offer a more complete package of wireless services. Wireless service providers establish interconnection agreements with local exchange carriers and interexchange carriers, thereby integrating their network
with the existing wireline network. In addition, wireless service providers normally agree to supply service to subscribers from other compatible wireless networks that are temporarily located in or traveling through their service areas in a
practice called roaming. Roaming agreements usually require the subscribers wireless service provider to pay the serving carrier at rates prescribed by the serving carrier. Although wireless, PCS and enhanced specialized mobile radio systems
utilize similar technologies and hardware, each system operates on different frequencies and uses different technical and wireless network standards. Multi-mode or band telephones, however, make it possible in many instances for users of one type of
network to roam on a different type of network outside of their service area.



Wireless signal transmission is accomplished through the use of various forms of air interface protocols. Four distinct technologies have evolved as the most prevalent standards in Russia and have been deployed
worldwide in wireless networks:



| |  | GSM is a digital standard that originated in Europe and is currently the worlds largest wireless standard. GSM-900 and GSM-1800 were developed with the goal of creating a
unified pan-European standard, giving the user a near uniform service throughout Europe. GSM-1900 is used in the United States, Canada and in a number of countries in Latin America. GSM-900 is currently considered to be commercially more attractive
than GSM-1800 because it requires fewer rebroadcasting stations and is more widespread in Europe, thus simplifying international roaming. GSM-1800 is more advantageous in densely populated urban areas. The most efficient application of GSM
technology is a combination of GSM-900 and GSM-1800 in a unified wireless network that is commonly referred to as a dual band GSM-900/1800 network.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | AMPS is an analog standard developed by Bell Labs in the 1970s and was first used commercially in the United States in 1983. AMPS operates in the 800 MHz band and is currently one
of the worlds largest wireless standards. Time Divisional Multiple Access, or TDMA, was adopted and certified by the Cellular Telecommunications Industry Association. AMPS systems may be converted to D-AMPS networks using TDMA technology.
Digital technology is an advanced technology that can offer increased network capacity, better sound quality, greater call privacy, better fraud control, SMS and more complex data transmission features relative to analog technology.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | CDMA is a Qualcomm-designed digital spread-spectrum technology. CDMA is used most commonly in the United States and a number of countries in Asia. CDMA is characterized by high
capacity, employing spread-spectrum technology and a special coding scheme. In Russia, CDMA technology is used in two standards, IS-95 in the 800 MHz frequency range, or CDMA-800, and IMT-MC in the 450 MHz frequency range. The former Ministry of
Communications restricted CDMA-800 use to fixed networks.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | NMT-450 is an early generation European analog standard developed by Ericsson and Nokia to service the rugged Scandinavian terrain. The advantages of digital standards are not
available to subscribers using this standard.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



While the AMPS/D-AMPS-based wireless standard remains one of the more widely used standards in the world, particularly in the United States, reportedly accounting for approximately 7.8% of all worldwide wireless subscribers as of the end of
2002, GSM subscribers reportedly accounted for 72.5% of the worlds digital market and 71.5% of the worlds wireless market at the end of 2003.



Each technological standard is currently incompatible with each other technological standard. As a result, wireless subscribers may only utilize digital
wireless service in the areas where the technological standard that is utilized by their handset has been deployed. Over time, these standards are expected to converge and become compatible, assuming wireless service providers invest in developing
3G technologies.



71



---

##### Table of Contents

A subscriber using a multi-mode telephone may obtain service from both digital and analog systems and may
also utilize both wireless services and PCS. Until digital wireless networks become fully developed, those digital subscribers who wish to utilize wireless services in areas currently without digital coverage will need to use a multi-mode handset
that utilizes an areas applicable digital standard.



The
capacity and quality of domestic and international wireless networks have evolved with advances in technology. In response to capacity and level of service demands, wireless service providers are expanding their current infrastructure and are
implementing new wireless technologies, such as 3G networks. The level of technology advancement used in mobile wireless networks is generally grouped into the following three categories:



| |  | First generation wireless networks feature analog technology that provides voice and low speed data services.
| | - | -------------------------------------------------------------------------------------------------------------



| |  | Second generation wireless networks, including GSM, feature digital technology. Digital technology provides wireless service providers and subscribers with advantages over analog
technology, including increased network capacity, better sound quality, greater call privacy, better fraud control, SMS and more complex data transmission features, including facsimile, electronic mail, Internet and data network access. Some of
these advanced products developed within GSM technology are referred to as 2.5 GSM products.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 3G wireless networks, including those utilizing UMTS technology and CDMA 2000, feature increased capacity and data speeds that permit wireless transmission of integrated voice,
video and data traffic. This technology can be implemented with new infrastructure or also as an equipment overlay to existing second generation wireless networks. Wireless service providers anticipate beginning to upgrade their wireless networks to
third generation levels over the next few years as regulatory agencies around the world begin to license the frequency band for this digital technology. Licenses to use this frequency band have already been awarded in much of Western Europe and in
certain Asian Pacific basin countries, including Japan, Australia and South Korea, and are expected to be awarded elsewhere in Europe and in the United States over the next several years.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The introduction of WAP constitutes an important step in the convergence of
wireless devices and the Internet, a trend that is expected to accelerate with the introduction of new technologies, including GPRS. WAP is a relatively new advanced intelligent messaging service for digital wireless devices and other wireless
terminals that allows users to see Internet content in special text format on special WAP-enabled GSM wireless devices. WAP has become the current global industry standard for providing data to mobile wireless devices. This convergence of
technologies is expected to expand the type of services available on wireless devices, while also increasing the use of wireless telecommunications services. Wireless penetration rates worldwide are expected to increase as new technologies provide
improved access to the Internet and a wider range of service capabilities through wireless devices.



72



---

##### Table of Contents

REGULATION OF TELECOMMUNICATIONS IN THE RUSSIAN FEDERATION



The new Federal Law on Communications, which we refer to in this Annual
Report on Form 20-F as the Communications Law or New Law, and which became effective on January 1, 2004, is the principal legal act regulating the Russian telecommunications industry. The Communications Law sets forth the general principles and
guidelines of Russias telecommunications regulatory structure. It is expected that in 2004-2005, the Russian government will develop 35 additional orders and regulations to provide the legal framework envisioned by the New Law. Only a few such
orders and regulations have been promulgated as of the date of this Annual Report on Form 20-F and as a result, there is significant uncertainty regarding many aspects of the regulation of the telecommunications industry in Russia, including the
wireless industry.



The Communications Law sets forth general
principles for the regulation of the telecommunications industry, including a description of the institutional framework for the federal governments involvement in the regulation, administration and operation of the telecommunications
industry. The most important aspects of the Communications Law with respect to our business address the federal governments authority to:



| |  | license wireless service providers;
| | - | -----------------------------------



| |  | allocate radio frequencies;
| | - | ---------------------------



| |  | certify telecommunications equipment;
| | - | -------------------------------------



| |  | allocate numbering capacity;
| | - | ----------------------------



| |  | ensure fair competition and freedom of pricing; and
| | - | ---------------------------------------------------



| |  | conduct oversight of operators compliance with the terms of their licenses and Russian law.
| | - | --------------------------------------------------------------------------------------------



Under the New Law, all service providers have access to the Interconnected Telecommunications Network, or ITN, which is a
centrally managed complex of telecommunications networks owned by different enterprises and governmental agencies of the Russian Federation. Each service provider has the right to interconnect its networks with the ITN as long as the individual
service provider complies with the connection conditions set forth in its license.



As discussed in more detail below, before commercial launch of a wireless telecommunications network, a company must receive, among other things:



| |  | a license issued by the Federal Surveillance Service for Communications, or Service, to provide mobile telephony services using a specific standard and band of radio frequency
spectrum;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | certificates of compliance for the equipment to be used in the network or adoption of a declaration of compliance with the technical rules for the telecommunications devices and
services;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | permission from the Federal Surveillance Service for Communications to use radio frequency for its radio electronic devices, or REDs;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| |  | registration of its REDs with the Federal Surveillance Service for Communications; and
| | - | --------------------------------------------------------------------------------------



| |  | permission from the territorial department of the Federal Surveillance Service for Communications for the operation of communications equipment.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



Regulatory Authorities



The Ministry of Transport and Communications of the Russian Federation is the federal body with executive power to regulate
the telecommunications industry. The Ministry of Transport and Communications has authority to set policy and adopt regulations in the communications area (in accordance with the Constitution, federal laws, legal acts issued by the President and the
Government), and make proposals to the President and the Government on issuance of legal acts regarding the following issues:



| |  | reformation of the structure in the telecommunications area;
| | - | ------------------------------------------------------------



73



---

##### Table of Contents

| |  | development of telecommunications;
| | - | ----------------------------------



| |  | international cooperation in the telecommunications area; and
| | - | -------------------------------------------------------------



| |  | security in the telecommunications area.
| | - | ----------------------------------------



The Ministry of Transport and Communications controls numerous federal agencies, including the recently established Federal Communications Agency and the
Federal Surveillance Service for Communications.



Pursuant to
Order No. 163 of the Russian Government dated April 6, 2004, or Order 163, the main functions of the Federal Surveillance Service for Communications relevant to our business and the wireless industry include the licensing of activities in the area
of telecommunications and information technologies, control over telecommunications and information technologies, control over radiation of radio electronic devices and high frequency devices, the registration of allocated radio frequencies, radio
electronic devices and high frequency devices, and the issuance of individual legal acts on the basis of and in furtherance of existing legislation on matters falling within the competence of the Service.



Pursuant to Order No. 176 of the Russian Government dated April 9, 2004, or
Order 176, the main functions of the Federal Communications Agency relevant to our business and the wireless industry include arranging for the implementation of inter-state and federal special-purpose programs in the area of telecommunications and
information technologies, rendering services in the area of telecommunications and information technologies to the general public on the terms established by federal laws, including ensuring allocation and proper use of radio frequencies (radio
frequency bands) intended for civil use and the numbering resources in accordance with the established procedure, arranging of operation, development and upgrade of the federal telecommunications, national information technologies and
telecommunications structure, organization of the network of certification centers for electronic digital signature, issuance of individual legal acts on the basis of and in furtherance of existing legislation and, maintaining registers, records and
cadastres.



In addition to the bodies mentioned above, the
Federal Security Service is primarily responsible for the development and maintenance of networks for the Russian government and the Russian Ministry of Health Protection has some authority over the location of telecommunications equipment.



Licensing to Provide Telecommunications Services



Legal entities and individual entrepreneurs may render commercial
telecommunications services only on the basis of a license to engage in telecommunications services. Until the Russian government adopts relevant regulations that establish licensing procedures and confirms the telecommunications activities for
which a license is required in accordance with the New Law, it appears that no new licenses will be issued. Under the New Law, the Federal Surveillance Service for Communications will issue licenses to provide telecommunications services on the
basis of an application from an operator and, when applicable, on the basis of results of a tender or an auction. Under the Communications Law, licenses to provide telecommunications services may be issued for three to 25 years, and one person may
hold several different licenses. Under the Communications Law, licenses are issued on the basis of the results of tenders (auctions, bidding) if:



| | 1) | telecommunications services are rendered with the use of a radio frequencies band, and the state commission for radio frequencies establishes that the radio frequencies band
available for rendering services limits the number of telecommunications operators that may provide services in a particular territory; or
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | a particular territory has limited resources of the public-service communications network, including a limited numbering resource, and the relevant federal executive body in the
communications area which has yet to be determined, establishes that the number of telecommunications operators in such a territory must be limited.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



74



---

##### Table of Contents

The Federal Surveillance Service for Communications may renew an existing license based on an application
of the operator. Such application for the licenses renewal may be rejected if, as of the date of submission of the application, the operator has been found to have violated the license terms and such violations have not been cured.



The Communications Law provides that licenses may be reissued by a
relevant licensing body (currently, the Federal Surveillance Service for Communications) as follows:



| | 1) | On the basis of an application of the license holder, the license may be reissued to the legal successor of the license holder. For this purpose, the successor is required to
furnish documents evidencing that the telecommunications networks and devices required to render telecommunications services under the license have been transferred to the successor, and documents evidencing reissuance to the successor of the
permissions to use radio frequencies in case such frequencies are used to render telecommunications services on the basis of the license to be reissued.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | In case of reorganization of a legal entity in the form of a merger, take-over or transformation, the license is reissued on the basis of the successors application.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3) | In case of reorganization of a legal entity in the form of a split or spin-off, the license is reissued on the basis of the relevant application of the interested successor(s). For
this purpose, the interested successor(s) are required to furnish documents evidencing that the telecommunications networks and devices required to render telecommunications services under the licenses to be reissued have been transferred to them,
and documents evidencing reissuance to them of the permissions to use radio frequencies in case such frequencies are used to render telecommunications services on the basis of the license to be reissued. If other successors challenge the rights of
interested successor(s) to have the license reissued, the dispute between them shall be resolved in court.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4) | In case of reorganization of a legal entity or a change in the details of a legal entity or an individual entrepreneur specified in the license, the licensee within 30 days shall
file an application to have the license reissued and enclose the documents confirming the changes specified in such an application. If such an application is not filed within the established period of time the license shall cease to be effective.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5) | The licensing body shall reissue the license within thirty days from the date of receipt of the relevant application.
| | -- | ---------------------------------------------------------------------------------------------------------------------



| | 6) | A fee shall be charged for reissuance of the license in the amount of one thousand Rubles which is paid to the federal budget.
| | -- | ------------------------------------------------------------------------------------------------------------------------------



| | 7) | In case of reissuance of a license, the licensing authority shall make relevant amendments to the register of telecommunications licenses.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------



It is unclear which of the foregoing rules set forth in the Communications
Law apply to different cases. For instance, in the case of a merger of one entity into another, with the latter being the legal successor to the former, it would appear that points (1), (2) and (4) may all apply but these provisions are
contradictory. For instance, points (1) and (4) envision that the application is submitted by the license holder while point (2) envisions that the application is submitted by the legal successor (or entity which will be the legal successor).
Furthermore, if the rules are interpreted to require the application to be filed within 30 days after such a merger or consolidation is complete (i.e., after the licensee ceases to exist and all of its rights and obligations are transferred to a new
legal entity which is its legal successor), then it is unclear under the New Law whether services may continue to be provided under the initial license during such 30 day period. We have requested clarification from the Ministry of Transport and
Communications with regard to which of the above-mentioned points should be applied in the case of the mergers of VimpelCom-Region and KB Impuls into VimpelCom. For a description of some of the risks associated with the completion of the mergers of
VimpelCom-Region and KB Impuls into VimpelCom and the corresponding transfer of licenses, frequencies and other permissions, please refer to the



75



---

##### Table of Contents

section of the Annual Report on Form 20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessIf we are
unable to complete our mergers with VimpelCom-Region and KB Impuls or some or all of VimpelCom-Regions and KB Impulss licenses, frequencies and other permissions are not transferred or reissued to us during the merger process, our
business may be materially adversely affected.



The New
Law provides for a limited number of reasons pursuant to which licenses to provide telecommunications services may be suspended by the Federal Surveillance Service for Communications. Prior to the suspension of a license, the Service may issue a
warning of its potential suspension if:



| | 1) | authorized state agencies identify a violation involving failure to comply with the rules established by the federal laws and other regulatory acts of the Russian Federation in the
telecommunications area;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | authorized state agencies identify violations of the license terms by the licensee; or
| | -- | --------------------------------------------------------------------------------------



| | 3) | the licensee fails to render services for over three months, including failure to render services from the date specified in the license as the start-of-service date.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Federal Surveillance Service for
Communications may suspend a license if:



| | 1) | it identifies violations that may impair rights, lawful interests, life or health of people, and provision for the needs of the state administration, including the presidential
communications, the governments communications, national defense needs, security of the state and enforcement of the law;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | the permission of the state commission for radio frequencies for the use by the licensee of the radio frequencies is cancelled, if such cancellation renders provision of services
impossible; or
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3) | the licensee fails to comply with a notice issued by the Service which requires that an identified violation be cured, including a notice which was issued in connection with the
warning of a potential suspension of the license.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A warning of a potential suspension of the license and the decision to suspend the license shall be communicated by the Federal Surveillance Service for Communications to the licensee in writing and shall contain the basis for such decision
or warning within ten days from the date of such decision or warning. The Service must establish a reasonable period for the licensee to cure the violation which resulted in the warning of a potential suspension of the license. Such period may not
exceed six months. If the licensee fails to cure the violation within the established period, the Service may suspend the license and request that a court cancel the license. If the licensee cures the violation which triggered suspension of the
license, the Service must restore the license.



Further, the
Communications Law provides that a telecommunications license may be revoked for the following reasons:



| | 1) | A license may be cancelled by a court on the basis of a claim filed by an interested person or the Federal Surveillance Service for Communications if:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) | inaccurate information was contained in the documents which served as the basis for the decision to issue such a license;
| | -- | -------------------------------------------------------------------------------------------------------------------------



| | b) | the licensee fails to cure the deficiencies which triggered suspension of its license; or
| | -- | -----------------------------------------------------------------------------------------



| | c) | the licensee fails to perform the obligations it assumed in the course of the tender (auction, bidding) (if the license was issued on the basis of the results of a tender (auction,
bidding).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | The Federal Surveillance Service for Communications shall cancel a license in the following cases:
| | -- | --------------------------------------------------------------------------------------------------



| | a) | liquidation of a legal entity or winding up of its activities as a result of a reorganization, except for a reorganization in the form of a transformation;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



76



---

##### Table of Contents

| | b) | certificate of state registration of an individual as an individual entrepreneur ceases to be in effect;
| | -- | --------------------------------------------------------------------------------------------------------



| | c) | licensee files a request to cancel the license; or
| | -- | --------------------------------------------------



| | d) | the license fee is not paid within three months from the date on which the applicant is notified of the issuance of the license.
| | -- | --------------------------------------------------------------------------------------------------------------------------------



If the license is cancelled the license fee shall not be refunded. The
decision of the Federal Surveillance Service for Communications to cancel a license shall be communicated to the licensee within ten days from the date of such decision and may be appealed in court.



A licensee pays a fee for review of the application for issuance of the
license in the amount of 300 Rubles, and a fee for the issuance of a telecommunications license (i) in the amount of 15,000 rubles (which is applicable, among other things, to licenses for telecommunication services involving use of radio
frequencies spectrum) or 1,000 Rubles (depending on types of services to be provided under the license) multiplied by the number of constituent subdivisions of the Russian Federation where the services are supposed to be provided under the license,
or (ii) shall be established by the terms of the tender (auction, bidding) if the license is issued on the basis of the results of a tender (auction, bidding). Licenses generally contain a number of other detailed conditions, including a date by
which service must begin, requirements for adhering to technical standards and a schedule of the capacity of the network that must be attained and either the percentage of the territory for which the license is issued or cities within the territory
for which the license is issued that must be covered by specified dates.



Radio Frequency Allocation



Before the New Law
came into effect, after obtaining a license, wireless telecommunications operators had to apply for frequencies in order to operate a network. It is not yet clear how frequencies will be allocated under the New Law. Allocation and use of frequencies
will be supervised by an inter-departmental collective body for radio frequencies under the auspices of either the Ministry of Transport and Communications, the Federal Communications Agency or the Federal Surveillance Service for Communications.
Pursuant to the Communications Law, regulation of the use of the radio frequencies spectrum is carried out by the above-mentioned inter-departmental collective body for radio frequencies which shall have the power to regulate the radio frequencies
spectrum. Pursuant to Order 163, one of the functions of the Federal Surveillance Service for Communications is to register radio frequencies allocations, radio electronic devices and high frequency devices. Pursuant to Order 176, the Federal
Communications Agency will ensure, in accordance with the established procedure, allocation and proper use of radio frequencies. Based on preliminary oral information from a representative of the former Ministry of Communications, the Federal
Communications Agency will be responsible for conducting tests necessary for adoption of decisions on allocation of radio frequencies (e.g., tests relating to electromagnetic compatibility), and the actual allocation of radio frequencies will be
carried out by the Federal Surveillance Service for Communications.



Prior to enactment of new regulations, we pay for the use of radio frequencies spectrum on the basis of Government Decree No. 552, dated June 2, 1998, On Payments for the Use of Radio-Frequency Spectrum, and on the basis of
Government Decree No. 895, dated August 6, 1998, On Approval of Regulations on Payment for the Use of the Radio Frequency Spectrum in the Russian Federation, which require all operators to pay an annual fee (set by the state radio
frequencies service and approved by the former Anti-Monopoly Ministry) for the use of their frequency spectrums. In addition, the New Law provides that the users of radio frequency spectrum shall make a one-time payment and annual payments for the
use of the spectrum to ensure control over the radio frequencies, conversion of the radio frequencies spectrum and financing for the transfer of the operating radio electronic devices to other radio frequency bands. Under the New Law, the Russian
government is required to define the amounts of payments, the procedure for the transfer of such payments and the use of proceeds from such payments.



According to Government Decree No. 380, dated April 28, 2000, On the Reorganization of the State System of Supervision over Communications and
Information in the Russian Federation, communications



77



---

##### Table of Contents

operators must also make monthly payments to fund the operations of Gossvyaznadzor, a Surveillance agency of the former Ministry of Communications. These
fees were determined by the former Ministry of Communications and approved by the former Ministry of the Economy and the former Ministry of Anti-Monopoly Policy in the amount of 0.3% of the revenues generated by providing communications services.
The New Law does not specify the exact amount of such payments or how they will be determined.



Equipment Certification



Telecommunications equipment used in Russia requires confirmation of compliance with certain technical requirements in the area of telecommunications and information technologies which falls within the competence of the Federal
Communications Agency. The design, production, sale, use or import of encryption devices, which include some commonly-used digital wireless telephones, require a license and equipment certification from the Federal Security Service.



Numbering Capacity



Numbering capacity is considered a scarce resource and therefore is allocated by the Russian government. In the
past, the former Ministry of Communications allocated numbering capacity. However, under the New Law, numbering capacity shall be issued on the basis of a governmental regulation specifying the procedure for allocation and use of numbering
resources. Pursuant to Order No. 176 of the Russian Government dated April 9, 2004, the Federal Communications Agency shall ensure allocation and proper use of numbering resources in accordance with the established procedure, which presumably means
that the numbering capacity will be allocated by the Federal Communications Agency. Under the New Law, an operator shall have to pay a fee for allocation of numbering capacity. The amount of such fee and procedure for its payment have not been
established yet.



Pricing, Competition and Interconnections



The Communications Law generally provides that tariffs for
telecommunications services may be negotiated between providers and users, although tariffs for some types of telecommunications services (e.g., provision of long distance telephone connections to fixed-line users, provision of local telephone
connections to fixed-line users) may be regulated by the federal government. Wireless telecommunications operators are free to set their own tariffs.



However, the Communications Law prohibits using a dominant position to hinder, limit or distort competition and it requires federal regulatory agencies to
promote competition among wireless service providers. Under the Communications Law, an operator that, together with its affiliated entities, has at least 25.0% of overall traffic in a certain geographic numeration zone or in the whole territory of
the Russian Federation, is considered an operator occupying a significant position in the communication network of general use (significant operator). Significant operators are subject to greater regulation by the Russian government. At
present, neither we nor our subsidiaries are included in the register of subjects of natural monopolies. Therefore, neither we nor our subsidiaries are subject to these regulations. However, if either we or our subsidiaries were considered to be
significant operators under the New Law, then certain regulations would apply, such as limitations on increases in tariffs for interconnecting services and services for channeling of traffic.



Russian legislation also requires that operators of public switched telephone
networks may not refuse to provide connections or discriminate against one operator over another. However, a regional fixed line operator may charge different interconnection rates to different wireless telecommunications operators, subject to
certain limitations.



Furthermore, Russian legislation (in
particular, the General Scheme for Creation and Development of the Federal Network of Mobile Radio-Telephone Communications of General Use in GSM Standard in Russia, approved by Decision No. 50 of the State Commission for Electric Communication,
dated December 25, 2002) provides that international connections of calls to or from GSM networks must be completed through Rostelecom.



78



---

##### Table of Contents

Compliance with Government Surveillance System



The Communications Law provides that telecommunications may be intercepted only pursuant to court order. Federal Law No.
144-FZ, dated August 12, 1995, On Operational-Investigative Activities, initiated a surveillance system, known as SORM, which is operated partly by the Federal Security Service, a government agency responsible for surveillance. In 1997,
the former Ministry of Communications and the Federal Security Service reached an agreement on matters relating to the implementation of SORM in the telecommunications industry. SORM requires telecommunications providers to ensure that their
networks are capable of allowing the government to monitor electronic traffic and requires telecommunications providers to finance the cost of additional equipment needed to make their systems compliant. Recent legislation extended access to
electronic traffic to three other state agencies, including the tax authorities. Currently, we are in compliance with Russian law requirements related to SORM and, accordingly, certain government agencies are able to monitor electronic traffic on
our network.



Regulation of the Internet



Currently, there is no comprehensive regulatory scheme directly applicable
to Internet content. As a result, it is somewhat unclear what type of licenses may be required for the provision of Internet and Internet-related services. The Russian media has reported, however, that the Russian parliament has recently begun to
consider the possibility to issue legislation regarding Internet content.



|ITEM 5. | Operating and Financial Review and Prospects
|------- | --------------------------------------------



The following discussion and analysis should be read in conjunction with the section of this Annual Report on Form 20-F entitled Item 3Key
InformationA. Selected Financial Data and our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 20-F. This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of numerous factors, including the risks discussed in the section of this Annual Report on Form 20-F entitled Item
3Key InformationD. Risk Factors and elsewhere in this Annual Report on Form 20-F.



Overview



We are a
leading provider of wireless telecommunications services in Russia, operating under the Bee Line GSM brand name. Bee Line GSM is one of the most recognized brand names in Russia. Independent sources estimate that our nationwide market
share of subscribers was 31.6% as of December 31, 2003, compared to 28.6% as of December 31, 2002. Based on independent estimates of the number of subscribers of our competitors in the Moscow license area, we estimate that our market share in the
Moscow license area was 49.3% as of December 31, 2003, compared to 51.6% as of December 31, 2002. We believe increased marketing competition among existing telecommunications services providers resulted in the decrease of our market share in the
Moscow license area in the year ended December 31, 2003. We estimate that our market share in the regions outside of the Moscow license area was 23.3% as of December 31, 2003, compared to 13.3% as of December 31, 2002.



Our GSM licenses permit us to operate wireless networks in areas populated by
approximately 134.0 million people, or approximately 92.0% of the Russian population as of December 31, 2003. We hold GSM licenses for seven out of Russias eight large geographical areas, or super-regions, including the Moscow license area.
Additionally, we hold GSM licenses for six smaller regions, all of which are located within the seven super-regions, including the Moscow license area.



Effective since year ended December 31, 2001, our company has two reportable segmentsthe Moscow license area and the regions outside of the Moscow
license area. The Moscow license area includes the City of Moscow and the Moscow region. The regions outside of the Moscow license area include all other regions of the Russian Federation. Our management analyzes the reportable segments separately
because of different economic



79



---

##### Table of Contents

environments and the different stages of development of markets of wireless telecommunications services in different regions, which require different
investment and marketing strategies. The Moscow license area is a more developed market for our companys services compared to the regions outside of the Moscow license area.



The Moscow market



During the year ended December 31, 2003, approximately 4.3 million new subscribers were added in the Moscow license area, representing an increase of
approximately 60.0% in the number of subscribers in the Moscow license area. As of December 31, 2003, we estimate that there were approximately 11.5 million subscribers in the Moscow license area, where the penetration rate increased to 67.6% from
42.4% as of December 31, 2002. In 2004, industry analysts have projected that the number of subscribers in the Moscow license area may reach 15.1 million and the Moscow penetration rate may approach approximately 87.0%.



Our Moscow subscriber base increased from approximately 3.7 million as of
December 31, 2002 to approximately 5.7 million as of December 31, 2003, an increase of 52.4%. In 2004, we intend to maintain our strong market position in the Moscow license area. While we expect our subscriber base to continue to grow, the Moscow
license area market is beginning to mature, and, therefore, we expect higher competition and a reduction in the annual growth rates of new subscribers and revenue in the Moscow license area market.



The regional market



During the year ended December 31, 2003, approximately 13.9 million new subscribers were added in the regions outside of the
Moscow license area, representing a nearly 129.0% increase in the number of subscribers in the regions. As of December 31, 2003, there were approximately 24.7 million subscribers in the regions outside of the Moscow license area, where the
penetration rate increased to 19.3% from 8.4% as of December 31, 2002. In 2004, industry analysts have projected that the number of subscribers in the regions outside of the Moscow license area will rise from approximately 24.7 million as of
December 31, 2003 to approximately 46.8 million as of December 31, 2004, with penetration rates expected to reach 35.9%. Given the current level of penetration, we believe that the mobile telecommunications market outside of the Moscow license area
will continue to expand rapidly over the next several years, after which we expect growth to slow as the market becomes saturated.



Our regional growth has exceeded the overall growth trend. In 2003, we expanded our subscriber base outside of the Moscow license area from approximately
1.4 million subscribers as of December 31, 2002 to approximately 5.8 million subscribers as of December 31, 2003, an increase of 301.1%. We have expanded in the regions primarily through organic growth, augmented by a few selective acquisitions of
existing operators primarily for the purpose of obtaining their subscribers. In the year ended December 31, 2003, we expanded our operations into the Northwest and Urals super-regions, bringing our license portfolio coverage to 92.0% of
Russias population. In the future, we will endeavor to gain access to a GSM license in the Far East, the last remaining super-region in Russia for which we do not have a GSM license.



Certain Performance Indicators



In each of 2003, 2002 and 2001, we increased our revenues primarily by
increasing our number of subscribers. We increased our number of subscribers primarily through organic growth, which was augmented during 2003, 2002 and 2001 by selected acquisitions. Approximately 3.5% and 1.4% of our consolidated total operating
revenue in each of 2003 and 2002, respectively, was generated by subsidiaries acquired in each such year, with the remaining increase in total operating revenues generated through organic growth and greenfield roll-outs. In each of 2003 and 2002, we
gained approximately 193,000 and 274,000 subscribers, respectively, as a result of our acquisitions of controlling interests in other wireless telecommunications companies (measured as of the date of acquisition).



80



---

##### Table of Contents

We offer both contract and prepaid services to our subscribers. The following table indicates our
subscriber figures, including the number of subscribers in the Moscow license area and the regions, as well as our prepaid subscribers as a percentage of our total subscriber base, for the periods indicated.



|                                  |  |                          |   |  |           |   |  |           |  
|--------------------------------- |  | ------------------------ | - |  | --------- | - |  | --------- | -
|                                  |  | Years Ended December 31, |  
|                                  |  | 2003                     |   |  | 2002      |   |  | 2001      |  
|Total number of subscribers:      |  | 11,436,900               |   |  | 5,153,100 |   |  | 2,111,500 |  
|Moscow                            |  | 5,659,600                |   |  | 3,712,700 |   |  | 1,911,200 |  
|Regions                           |  | 5,777,300                |   |  | 1,440,400 |   |  | 200,300   |  
|Percentage of prepaid subscribers |  | 86.9                     | % |  | 79.0      | % |  | 65.8      | %



We define our churn
rate as the total number of subscribers disconnected from our network in a given period expressed as a percentage of the midpoint of the number of our subscribers at the beginning and end of that period. We consider a subscriber to have been
disconnected if the subscriber is a contract subscriber who has not made a payment in the last two months or if the subscriber is a prepaid subscriber who has not had a charge on his or her phone in the preceding six months. Migration of subscribers
from our D-AMPS network to our GSM network, as well as migration between tariff plans, was technically recorded as churn, thereby contributing to the increase in our churn rate recorded in each of the last three years, although we did not lose those
subscribers. The following table shows our annual churn rates for the periods indicated:



|                   |  |                          |   |  |      |   |  |      |  
|------------------ |  | ------------------------ | - |  | ---- | - |  | ---- | -
|                   |  | Years Ended December 31, |  
|                   |  | 2003                     |   |  | 2002 |   |  | 2001 |  
|Total churn rate   |  | 39.3                     | % |  | 30.8 | % |  | 23.0 | %
|Moscow churn rate  |  | 46.6                     | % |  | 33.9 | % |  | 23.7 | %
|Regions churn rate |  | 29.2                     | % |  | 14.5 | % |  | 8.9  | %



The increase in our
churn rate during 2003 was primarily the result of high subscriber growth and increased marketing competition. A large portion of our new subscribers is first time users of mobile telecommunications services and first time users migrate between
tariff plans and operators more often than established users of mobile telecommunications services. We are developing marketing programs to increase subscriber loyalty among all of our subscriber segments to decrease our churn rate and we expect
loyalty among first time users of our services to increase.



While our subscribers and revenues have grown during each of 2003, 2002 and 2001, our average monthly service revenues per subscriber, or ARPU, have been decreasing. ARPU is a non-U.S. GAAP financial measure calculated for each month in the
relevant period by dividing our service revenue during that month, including roaming revenue, but excluding revenue from connection fees and sales of handsets and accessories, by the average number of our subscribers during the month. Service
revenues and connection fees is the most directly comparable financial measure to ARPU that is calculated and presented in accordance with U.S. GAAP. See Additional Reconciliations of Non-U.S. GAAP Financial Measures (Unaudited)
for more information regarding our use of ARPU as a non-U.S. GAAP financial measure.



Minutes of use per subscriber, or MOU, in Moscow has decreased in the each of the past two years, whereas MOU in the regions has increased during 2003. MOU is calculated for each month in the relevant period by
dividing the total number of billable minutes of usage for incoming and outgoing calls during that month (excluding guest roamers) by the average number of subscribers during the month.



81



---

##### Table of Contents

The following table shows our monthly ARPU and MOU for the periods indicated:



|        |  |                          |      |      |     |      |  |     |      
|------- |  | ------------------------ | ---- | ---- | --- | ---- |  | --- | -----
|        |  | Years Ended December 31,
|        |  | 2003                     |      | 2002 |     | 2001
|ARPU    |  | US$                      | 13.6 |      | US$ | 18.3 |  | US$ | 26.2 
|Moscow  |  | US$                      | 16.4 |      | US$ | 19.4 |  | US$ | 26.5 
|Regions |  | US$                      | 10.8 |      | US$ | 12.4 |  | US$ | 21.9 
|MOU     |  |                          | 89.8 |      |     | 92.3 |  |     | 105.3
|Moscow  |  |                          | 87.9 |      |     | 93.6 |  |     | 106.1
|Regions |  |                          | 92.4 |      |     | 84.7 |  |     | 85.5 



ARPU declined from
US$18.3 during 2002 to US$13.6 during 2003. Service revenues and connection fees is the most directly comparable financial measure to ARPU that is calculated and presented in accordance with U.S. GAAP. The decline in ARPU during 2003, 2002 and 2001
was primarily attributable to our tariff reductions in response to increased competition and to an increase in the number of our mass market subscribers as a proportion of the total number of our subscribers. Tariff reductions decrease revenues from
subscribers and thereby directly decrease ARPU. Tariff reductions indirectly decrease ARPU by attracting proportionately more mass market subscribers, who typically generate lower ARPU as compared to corporate and business subscribers. In the near
term, we expect competition to continue to put pressure on tariff pricing. However, in the longer term we expect price competition to decrease as telecommunications operators will seek to stabilize margins and diminished price competition will, in
turn, decrease the negative effect of tariff reductions on ARPU. As we increase the number of subscribers in the regions outside of Moscow, we expect an increasing proportion of our subscribers to be mass market subscribers. Over the next several
years, we expect the decline in ARPU to continue as we expect our mass market subscriber base in the regions to grow faster than our other subscriber segments. However, in the longer term we expect the segments that constitute our subscriber mix to
stabilize in proportion to one another at which time we expect growth among the different subscriber segments will be proportionate. If this happens, we expect that ARPU will stabilize as downward pressure on ARPU from growth in the mass market
segment will be balanced by proportionate growth in our business and corporate subscriber segments, which typically results in a higher level of ARPU.



The decline in MOU in the Moscow license area during the periods indicated above was primarily attributable to an increase in the number of our mass
market subscribers as a proportion of the total number of our subscribers, as mass market subscribers generate lower MOU than corporate and business subscribers. In the Moscow license area we expect MOU trends to stabilize. At the same time, the
regions are experiencing a period of MOU growth due to increasing consumption of telecommunications services. Because the Moscow market is beginning to mature, with penetration rates approaching 68.0% as of December 31, 2003 according to our
estimates, we expect MOU to stabilize in the Moscow license area before it begins to stabilize in the regions, where we estimate penetration rates as of December 31, 2003 to be approximately 19.3%.



Merger Announcements



On October 24, 2003, our shareholders approved the merger of VimpelCom-Region into VimpelCom. Under the terms of the merger,
Telenor and Alfa Group will receive, respectively, 3,648,141 and 7,300,680 newly-issued common shares of VimpelCom in exchange for their shares of voting capital stock of VimpelCom-Region. Upon completion of the merger, Telenor will own
approximately 26.6% and 29.9%, respectively, and Alfa Group will own approximately 32.9% and 24.5%, respectively, of VimpelComs total voting stock and common shares. On April 16, 2004, our shareholders approved amendments to our charter that
will become effective upon registration with the appropriate authority. Once these charter amendments are registered and certain ancillary steps taken (including the issuance of shares to Telenor and Alfa Group, and exclusion of VimpelCom-Region
from the state register of legal entities), the merger of VimpelCom-Region into VimpelCom will be complete. We plan to register the charter amendment either when the licenses, frequencies and other permissions held by VimpelCom-Region are reissued
to VimpelCom or when we receive assurance from the appropriate regulatory authority that they will be reissued to VimpelCom following the merger of VimpelCom-Region into VimpelCom. The current legal and regulatory regime is unclear about the timing
and procedure of such transfer or reissuance in the event of a merger and we cannot assure you that we will be able to complete the merger.



82



---

##### Table of Contents

We initiated the VimpelCom-Region merger process to create a stronger platform for future expansion,
simplify our companys capital structure and give our company full exposure to the growth potential in the regions. As of December 31, 2003, our minority interest in VimpelCom-Region was approximately US$179.7 million and the goodwill portion
of our intangible assets was approximately US$9.8 million. If the merger is completed, our minority interest and the expenses portion of our income statement will be reduced by the portion of our minority interest related to VimpelCom-Region, the
goodwill amount reflected on our balance sheet will increase to the extent that the purchase price that we pay for VimpelCom-Regions voting capital stock will be in excess of the book value of VimpelCom-Region and our additional paid-in
capital will increase to the extent of the excess of the total value of the voting stock of VimpelCom-Region over the cost of the new shares that we issue to Alfa Group and Telenor in exchange for their shares in VimpelCom-Region. The goodwill, if
any, that we will realize as a result of the merger will be subject to an annual impairment test.



On March 24, 2004, our board of directors recommended to our shareholders to approve the merger of our wholly-owned subsidiary, KB Impuls, into VimpelCom.
We initiated the KB Impuls merger largely in response to public statements by the then-acting Minister of Communications that the reissuance of the license held by KB Impuls to our company would resolve the regulatory dispute between our company and
Moscow Gossvyaznadzor. The merger of KB Impuls into VimpelCom is subject to various Russian regulatory approvals and the satisfaction of certain conditions precedent, including the transfer or reissuance of the telecommunications licenses,
frequencies and other permissions held by KB Impuls to VimpelCom.



For a description of some of the risks associated with the proposed mergers of VimpelCom-Region and KB Impuls into VimpelCom, see the section of this Annual Report on Form 20-F entitled Item 3Key InformationD. Risk
FactorsRisks Related to Our BusinessIf we are unable to complete our mergers with VimpelCom-Region or KB Impuls or some or all of VimpelCom-Regions and KB Impulss licenses, frequencies and other permissions are not
transferred or reissued to us during the merger process, our business may be materially adversely affected.



GSM License for the Moscow License Area



On January 9, 2004, KB Impuls officially received a notice from the Moscow Gossvyaznadzor which contained a provision that raised issues regarding the
adequacy of the documentation of the agency relationship pursuant to which our company acts as KB Impulss agent with respect to concluding agreements with KB Impulss Moscow GSM subscribers. In the notice, Moscow Gossvyaznadzor used
certain technical drafting issues in the subscriber agreements and the agency agreement as a basis for asserting first, that KB Impuls does not have any agreements with subscribers and, therefore, has violated Russian law, and second, that the our
agency agreement with KB Impuls does not specifically provide that we shall sign subscriber agreements on behalf of KB Impuls, also in violation of Russian law. KB Impuls challenged the relevant provisions in the Moscow Gossvyaznadzor notice and the
Moscow Arbitrazh Court ruled in its favor and invalidated the provisions. On April 28, 2004, we received the appeal of this ruling filed by Moscow Gossvyaznadzor on April 23, 2004. We cannot be certain of a favorable outcome to this dispute and we
cannot make an estimate of the effect of the ultimate resolution of this matter on our consolidated financial statements or results of operations.



Revenues



We generate our revenues from providing wireless telecommunications services and selling handsets and accessories. Our primary sources of revenues consist
of:



Service revenues



Our service revenues include airtime charges from contract and prepaid
subscribers, monthly contract fees, roaming charges and charges for value added services such as SMS, call number identification, voice mail and call waiting. Connection fees are one time charges for the allocation of a telephone number.



83



---

##### Table of Contents

In the past, connection fees were a notable component of our service revenues. However, in response to
competitive factors, we have reduced or eliminated most connection fees in the Moscow license area and the majority of the regions in which we operate. We expect that connection fees are not likely to be significant going forward. Service revenues
and connection fees constituted approximately 94.8%, 94.7% and 90.7% of our net operating revenues for 2003, 2002 and 2001, respectively. We believe that service revenues will continue to increase in 2004 primarily as a result of the continued
growth in our subscriber base. We also expect that our service revenues will continue to grow at a faster rate in the regions than in the Moscow license area.



During 2003, roaming revenues generated by our subscribers increased 37.7% to US$80.3 million compared to US$58.3 million during 2002, and our roaming
revenues received from other wireless services operators for providing roaming services to their subscribers increased 42.2% to US$78.8 million compared to US$55.4 million during 2002. These increases were primarily due to improved and expanded
network coverage and an increase in the number of our roaming partners. Our service revenues excluding roaming revenues grew at a faster rate than our roaming revenues. As a result, roaming revenues as a percentage of our net operating revenues
decreased from 14.8% during 2002 to 11.9% during 2003. Over the next several years, we expect our roaming revenues from wireless users routing through the Moscow license area, which currently represents a substantial portion of our roaming revenues,
to stabilize as a percentage of our net services revenues.



During 2003, we generated US$103.4 million of revenue or 7.7% of our consolidated operating revenues in the Moscow license area from value added services, or VAS. This represented a 92.2% increase over revenues of US$53.8 million during
2002. We currently provide traditional value added services such as voice mail, call forwarding, call waiting, conference calling, call blocking, caller-ID, automatic dialing and voice dialing. We also provide a variety of messaging value added
services, such as outgoing SMS, EMS, MMS, e-mail, content delivery, games and other infotainment services. Our revenues from VAS in the regions were insignificant during 2002 and US$41.2 million or 3.1% of our consolidated net operating
revenues in 2003. Over the next several years, we expect that revenues from VAS will increase as a percentage of our net operating revenues in both the Moscow license area and the regions.



Sales of handsets and accessories.We sell wireless handsets and
accessories to our subscribers for use on our networks. Sales of handsets and accessories constituted approximately 4.9%, 6.5% and 10.2% of our net operating revenues during 2003, 2002 and 2001, respectively. Over the next several years, we expect
absolute revenues from sales of handsets and accessories to remain stable in absolute terms but to continue to decrease as a percentage of our net operating revenues.



Expenses



We have two categories of expenses directly attributable to our revenues: service costs and the costs of handsets and accessories.



Service Costs



Service costs include interconnection and traffic costs, channel rental costs, telephone line rental costs, roaming expenses
and charges for connection to special lines such as 911. An increasing number of our subscribers are using 10 digit federal telephone numbers, which creates a cost advantage for us. In 1998, we began offering our subscribers in the Moscow license
area the option of receiving a 10 digit federal telephone number as an alternative to receiving a more expensive, local seven digit Moscow telephone number. Our costs for the use of seven-digit Moscow telephone numbers consist of a flat monthly line
rental fee and a usage fee based on traffic. In contrast, for the use of federal telephone numbers, we currently pay a much lower usage fee based on traffic and we do not pay a monthly line rental fee, resulting in significantly lower service costs
with respect to our subscribers using federal telephone numbers. Most of our subscribers in the regions use 10 digit federal telephone numbers. Our service margin percentage improved significantly to 84.7% during 2002, compared to 80.7% during 2001,
primarily due to the higher proportion of our subscribers using federal telephone numbers. Our service margin percentage during



84



---

##### Table of Contents

2003 was 84.9%, substantially unchanged over the service margin during 2002. Service margin represents aggregate service revenues and aggregate connection
fees less service costs. Service margin percentage is service margin expressed as a percentage of service revenues and connection fees. We expect that competitive pressure and new technologies may reduce certain service costs over the next several
years, most likely including transport, interconnection and other traffic costs, although there is a risk that charges for federal numbers may increase. For the risks associated with future allocation of federal telephone numbers, please see the
section of this Annual Report on Form 20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessWe may soon face a shortage of federal telephone numbers that are currently available to us and our
access to additional federal telephone numbers is limited.



Costs of
Handsets and Accessories



Our costs of handsets and
accessories sold represent the amount that we pay for this equipment. We purchase handsets and accessories from third party manufacturers for resale to our subscribers for use on our networks. Before 2001, we subsidized sales of handsets and
accessories in order to encourage the use of our networks. Since 2001, we have recorded profits from the sales of handsets and accessories of US$10.9 million during 2003, US$8.2 million during 2002 and US$5.6 million during 2001. Subsidies or
profits from the sale of handsets and accessories are calculated as the difference between the revenues generated from the sales and the costs of the handsets and accessories sold. Although we have not subsidized handsets and accessories since 2001
primarily because of the rapid expansion of the mobile telecommunications market during that period, we may have to subsidize handsets and accessories in the future if competition for subscribers increases.



Operating Expenses



In addition to service costs and the costs of handsets and accessories, our operating expenses include:



Selling, general and administrative expenses.Our selling, general
and administrative expenses include:



| |  | dealers commissions;
| | - | ---------------------



| |  | salaries and outsourcing costs, including related social contributions required by Russian law;
| | - | -----------------------------------------------------------------------------------------------



| |  | marketing and advertising expenses;
| | - | -----------------------------------



| |  | other miscellaneous expenses, such as insurance, operating taxes, license fees, and accounting, audit and legal fees;
| | - | ---------------------------------------------------------------------------------------------------------------------



| |  | repair and maintenance expenses;
| | - | --------------------------------



| |  | rent, including lease payments for base station sites; and
| | - | ----------------------------------------------------------



| |  | utilities.
| | - | ----------



Marketing and sales-related expenses comprise a large portion of our selling, general and administrative expenses and consist primarily of dealers commissions, salaries and outsourcing costs and advertising
expenses. Acquisition cost per subscriber, or SAC, is a non-U.S. GAAP financial measure calculated as dealers commissions, advertising expenses and handset subsidies for the relevant period divided by the number of new subscribers connected to
our networks during the period. Selling, general and administrative expenses is the most directly comparable financial measure to SAC that is calculated and presented in accordance with U.S. GAAP. See Additional Reconciliations of
Non-U.S. GAAP Financial Measures (Unaudited) for more information regarding our use of SAC as a non-U.S. GAAP financial measure.



In 2003, our SAC fell to US$19.3 from US$25.7 during 2002 and US$37.6 during 2001, primarily due to a decrease in the average dealer commission per new
subscriber and a decrease in the amount spent on advertising per new subscriber as the number of new subscribers grew faster than advertising expenses. SAC also decreased during 2003 because a growing percentage of our new subscribers were located
in the regions, where SAC is



85



---

##### Table of Contents

lower than in the Moscow license area primarily as a result of the lower dealer commissions and advertising expenses per subscriber in the regions than in
the Moscow license areas. During 2001 and 2002, we made certain improvements in our distribution network and increased the number of our sales offices and points of sale. In the first quarter of 2001, we acquired the Mobile Center dealer
network, one of the largest retail dealer networks in Moscow, for approximately US$3.2 million. In 2003, Mobile Center added nine new offices and as of December 31, 2003, our Mobile Center dealer network consisted of 37 sales offices. In the near
term, we expect our SAC to continue to decrease as we expect our subscriber base to grow in line with the expected penetration rate growth in the regions and to outpace growth in commission and advertising expenses. Selling, general and
administrative expenses is the most directly comparable financial measure to SAC that is calculated and presented in accordance with U.S. GAAP.



Depreciation and amortization expense. We depreciate the capitalized costs of our tangible assets, which consist mainly of equipment and buildings
owned by us. In addition, we have historically amortized our intangible assets, which consist primarily of telecommunications licenses and frequency allocations, purchases of telephone line capacity for local numbers in the Moscow license area and
the regions and goodwill.



Effective January 1, 2002, goodwill
is no longer being amortized and is subject to an annual impairment test. Intangible assets constituted 7.1% of our total assets and 16.3% of our shareholders equity as of December 31, 2003. In contrast to Moscow telephone numbers, we
currently do not have to purchase telephone line capacity for federal telephone numbers, which is allocated by governmental bodies. In the future, we expect that an increasing portion of our subscriber base will continue to use federal numbers. For
the risks associated with future allocation of federal telephone numbers, please see the section of this Annual Report on Form 20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessWe will soon
face a shortage of federal telephone numbers that are currently available to us and our access to additional federal telephone numbers is limited. Consequently, we do not expect to experience an increased amortization expense for telephone
line capacity purchases despite the anticipated growth in our subscriber base. Our total capital investments for 2002 were approximately US$578.3 million, with $509.1 million of capital expenditures for the purchase of property and equipment and
US$69.2 million for the acquisition of new entities (net of cash holdings of acquired companies). Our total capital investments for 2003 were approximately US$770.5 million, with US$728.0 million for the purchase of property and US$42.5 million for
the acquisition of new entities (net of cash holdings of acquired companies). Our increased capital expenditures caused our total depreciation and amortization expenses to increase by 90.2% during 2003 compared to 2002 and by 58.9% during 2002
compared to 2001. Over the next several years, we expect to continue making significant capital expenditures as we expand our regional networks, which will increase our future depreciation and amortization expense.



In January 2004, we changed the estimated useful life of GSM
telecommunications equipment from 9.5 years to seven years in the course of our continuing evaluation of the use of our technology and as a result of the Russian Governments announcements in January 2004 of plans to initiate the process of
awarding licenses for new mobile communications technologies. This change will decrease net income for the year ended December 31, 2004 by approximately US$40.0 million. See the section below entitled Current Accounting
PoliciesIntangible Assets.



Provision for
doubtful accounts. We include in our operating expenses an estimate of the amount of our accounts receivable that we believe will ultimately be uncollectible. We base the estimate on historical data and other relevant factors, such as the
financial condition of the economy as a whole. Looking forward, over the next several years, we expect our provision for doubtful accounts to continue to remain low as a percentage of net operating revenues due to an anticipated increase in the
number of prepaid subscribers. In addition, we are continually reviewing our collection practices to identify ways to manage risk and improve how we monitor and collect accounts receivable.



Interest expense.We incur interest expense on our vendor financing
agreements, loans from banks, the loan from J.P. Morgan AG, capital leases and other borrowings. Our interest-bearing liabilities carry both fixed and floating interest rates. On our borrowings with a floating interest rate, the interest rate is
linked either to LIBOR or



86



---

##### Table of Contents

to EURIBOR. During 2003, our interest expense amounted to US$68.2 million, or 5.1% of net operating revenues, a 46.4% increase compared to US$46.6 million,
or 6.1% of net operating revenues during 2002. Our interest expense depends on a combination of prevailing interest rates and the amount of our outstanding interest-bearing liabilities. The increase in our interest expense during 2003 was primarily
attributable to the interest expenses associated with the loan from J.P. Morgan AG and the Russian ruble-denominated bond issued by our subsidiary VimpelCom Finance in May 2003. During 2004 and 2005, based upon our current business plan we expect to
raise up to US$600.0 million in interest-bearing liabilities and to repay approximately US$539.0 million.



Income tax expense.The Russian Federation was the only tax jurisdiction in which our income was subject to taxation. On August 6, 2001, a law was
signed which introduced certain changes in Russian tax legislation reducing the statutory income tax rate from 35.0% to 24.0% effective January 1, 2002. Income tax expense includes both current and deferred tax expense. In 2003, we incurred US$108.6
million of income tax expense, a 117.6% increase compared to US$49.9 million during 2002. This increase was primarily due to the increase in our taxable income. Our effective income tax rate of 29.4% differed from the statutory income tax rate of
24.0% due to the permanent differences between Russian tax accounting and U.S. GAAP accounting, in particular with respect to recognition of foreign currency exchange gains or losses and non-deductible expenses. Russias federal and local tax
laws and regulations are subject to frequent change, varying interpretations and inconsistent enforcement.



87



---

##### Table of Contents

Results of Operations



The table below shows, for the periods indicated, the following statement of operations data expressed as a percentage of net operating revenues



|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | - |  | ----- | - |  | ----- | -
|                                                                                                                       |  | Years Ended December 31, |  
|                                                                                                                       |  | 2003                     |   |  | 2002  |   |  | 2001  |  
|Consolidated statements of income                                                                                      |  |                          |   |  |       |   |  |       |  
|Operating revenues:                                                                                                    |  |                          |   |  |       |   |  |       |  
|Service revenues and connection fees                                                                                   |  | 94.8                     | % |  | 94.7  | % |  | 90.7  | %
|Sales of handsets and accessories                                                                                      |  | 4.9                      |   |  | 6.5   |   |  | 10.2  |  
|Other revenues                                                                                                         |  | 0.3                      |   |  | 0.2   |   |  | 0.3   |  
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Total operating revenues                                                                                               |  | 100.0                    |   |  | 101.4 |   |  | 101.2 |  
|Less revenue-based taxes                                                                                               |  |                         |   |  | (1.4  | ) |  | (1.2  | )
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Net operating revenues                                                                                                 |  | 100.0                    | % |  | 100.0 | % |  | 100.0 | %
|Operating expenses:                                                                                                    |  |                          |   |  |       |   |  |       |  
|Service costs                                                                                                          |  | 14.3                     |   |  | 14.5  |   |  | 17.5  |  
|Cost of handsets and accessories sold                                                                                  |  | 4.0                      |   |  | 5.4   |   |  | 8.9   |  
|Selling, general and administrative expenses                                                                           |  | 35.0                     |   |  | 35.4  |   |  | 35.3  |  
|Depreciation                                                                                                           |  | 11.3                     |   |  | 11.1  |   |  | 11.5  |  
|Amortization                                                                                                           |  | 2.6                      |   |  | 1.5   |   |  | 3.0   |  
|Provision for doubtful accounts                                                                                        |  | 0.8                      |   |  | 2.8   |   |  | 3.2   |  
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Total operating expenses                                                                                               |  | 68.0                     |   |  | 70.7  |   |  | 79.4  |  
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Operating income                                                                                                       |  | 32.0                     | % |  | 29.3  | % |  | 20.6  | %
|Other income and expenses:                                                                                             |  |                          |   |  |       |   |  |       |  
|Interest income                                                                                                        |  | 0.6                      |   |  | 0.9   |   |  | 1.4   |  
|Other income                                                                                                           |  | 0.3                      |   |  | 0.2   |   |  |      |  
|Interest expense                                                                                                       |  | (5.1                     | ) |  | (6.1  | ) |  | (6.4  | )
|Other expenses                                                                                                         |  |                         |   |  |      |   |  |      |  
|Net foreign exchange loss                                                                                              |  | (0.1                     | ) |  | (1.2  | ) |  |      |  
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Total other income and expenses                                                                                        |  | (4.3                     | ) |  | (6.2  | ) |  | (5.0  | )
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Income before income taxes, minority interest and cumulative effect of change in accounting principle                  |  | 27.7                     | % |  | 23.1  | % |  | 15.6  | %
|Income tax expense                                                                                                     |  | 8.2                      |   |  | 6.4   |   |  | 4.4   |  
|Minority interest in net earnings (losses) of subsidiaries, before cumulative effect of change in accounting principle |  | 2.0                      |   |  | (0.2  | ) |  |      |  
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Income before cumulative effect of change in accounting principle                                                      |  | 17.5                     |   |  | 16.9  |   |  | 11.2  |  
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Cumulative effect of change in accounting principle                                                                    |  |                         |   |  |      |   |  |      |  
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Minority interest in cumulative effect of change in accounting principle                                               |  |                         |   |  |      |   |  |      |  
|                                                                                                                       |  |                          |   |  |       |   |  |       |  
|Net income                                                                                                             |  | 17.5                     | % |  | 16.9  | % |  | 11.2  | %



The regions outside of
the Moscow license area have been identified as a reportable segment starting with the year ended December 31, 2001 in accordance with the quantitative thresholds established in U.S. Statement of Financial Accounting Standard, or SFAS, No. 131,
Disclosures About Segments of an Enterprise and Related Information. For more information on our reportable segments, please see Note 25 to the consolidated financial statements included in this Annual Report on Form 20-F.



88



---

##### Table of Contents

The tables below provide selected information about the results of our two reportable segments for the
year ended December 31, 2003 compared to the year ended December 31, 2002 and the year ended December 31, 2002 compared to the year ended December 31, 2001.



|                                                           |  |                                                |  |       |   |  |          |   |  |       |   |  |       |   |  |          |  
|---------------------------------------------------------- |  | ---------------------------------------------- |  | ----- | - |  | -------- | - |  | ----- | - |  | ----- | - |  | -------- | -
|                                                           |  | Moscow License Area                            | 
|                                                           |  | 2003                                           |  | 2002  |   |  | % change |   |  | 2002  |   |  | 2001  |   |  | % change |  
|                                                           |  | (In millions of U.S. dollars, except % change) | 
|Total operating revenues excluding intragroup transactions |  | 918.7                                          |  | 698.7 |   |  | 31.5     |   |  | 698.7 |   |  | 416.9 |   |  | 67.6     |  
|Depreciation and amortization                              |  | 120.5                                          |  | 86.4  |   |  | 39.5     |   |  | 86.4  |   |  | 59.3  |   |  | 45.7     |  
|Operating income                                           |  | 325.8                                          |  | 238.5 |   |  | 36.6     |   |  | 238.5 |   |  | 94.4  |   |  | 152.6    |  
|Income before income taxes and minority interest           |  | 286.2                                          |  | 199.8 |   |  | 43.2     |   |  | 199.8 |   |  | 73.3  |   |  | 172.6    |  
|Income tax expense                                         |  | 89.0                                           |  | 49.1  |   |  | 81.3     |   |  | 49.1  |   |  | 18.6  |   |  | 164.0    |  
|Net income                                                 |  | 197.2                                          |  | 150.6 |   |  | 30.9     |   |  | 150.6 |   |  | 55.0  |   |  | 173.8    |  
|                                                           |  |                                                |  |       |   |  |          |   |  |       |   |  |       |   |  |          |  
|                                                           |  | Regions Outside of the Moscow License Area     | 
|                                                           |  | 2003                                           |  | 2002  |   |  | % change |   |  | 2002  |   |  | 2001  |   |  | % change |  
|                                                           |  | (In millions of U.S. dollars, except % change) | 
|Total operating revenues excluding intragroup transactions |  | 416.8                                          |  | 81.0  |   |  | 414.6    |   |  | 81.0  |   |  | 11.0  |   |  | 636.4    |  
|Depreciation and amortization                              |  | 64.8                                           |  | 11.3  |   |  | 473.5    |   |  | 11.3  |   |  | 2.1   |   |  | 438.1    |  
|Operating income (loss)                                    |  | 103.2                                          |  | (12.9 | ) |  | (900.0   | ) |  | (12.9 | ) |  | (6.7  | ) |  | 92.5     |  
|Income / (loss) before income taxes and minority interest  |  | 84.7                                           |  | (22.0 | ) |  | (485.0   | ) |  | (22.0 | ) |  | (7.1  | ) |  | 209.9    |  
|Income tax expense / (benefit)                             |  | 19.7                                           |  | 0.8   |   |  | 2362.5   |   |  | 0.8   |   |  | (0.1  | ) |  | (900.0   | )
|Net income (loss)                                          |  | 62.4                                           |  | (23.2 | ) |  | (369.0   | ) |  | (23.2 | ) |  | (7.0  | ) |  | 231.4    |  



Year Ended December 31, 2003
Compared to Year Ended December 31, 2002



Operating Revenues



Our total operating revenues, net of revenue-based taxes,
increased by 73.8% to US$1,335.6 million during 2003 from US$768.5 million during 2002. Net operating revenues from our Moscow license area operations increased by 31.5% to US$918.7 million during 2003 from US$698.7 million during 2002. Net
operating revenues from our operations in the regions increased by 414.6% to US$416.8 million during 2003 from US$81.0 million during 2002. Revenues from our Moscow license area operations constituted 68.8% of our net operating revenues during 2003
compared to 90.9% during 2002. Revenue growth in 2003 was primarily due to the overall increase in the number of our subscribers in the regions, 301.1% during this period, an increase in our revenues from VAS and an increase in our roaming revenues.
The increase in our roaming revenues was primarily due to the improved and expanded roaming coverage and a greater number of roaming partners, and the increase from VAS was primarily due to increased consumption of our VAS services during 2003 as
compared to 2002. In the future, we expect more rapid subscriber growth in the regions than in the Moscow license area, where the telecommunications services market is approaching saturation, and, therefore, we expect revenues from our operations in
the regions to continue to increase as a proportion of our net operating revenues.



Service revenues and connection fees increased by 74.0% to US$1,266.7 million during 2003 from US$727.9 million during 2002. Revenues from sales of handsets and accessories during 2003 increased 30.3% to US$65.0
million during 2003 from US$49.9 million during 2002, primarily due to the increase in the number of our subscribers. As a percentage of net operating revenues, revenues from sales of handsets and accessories decreased to 4.9% during 2003 from 6.5%
during 2002, as our service revenues increased at a faster rate than our revenues from sales of handsets and accessories.



89



---

##### Table of Contents

Operating Expenses



Service costs.Our service costs increased approximately 71.8% to US$191.4 million during 2003 from US$111.4 million during 2002. Our service costs
grew at a slower rate than net operating revenues, which led to an improvement in our gross margin percentage from 80.1% during 2002 to 81.6% during 2003. Gross margin is defined as net operating revenues less selected operating costs (specifically,
service costs, costs of handsets and accessories sold and costs of other revenues). Gross margin percentage is defined as gross margin expressed as a percentage of net operating revenues.



Our service costs remained stable relative to the growth in operating revenues primarily due to our continued ability to
enter into favorable interconnect agreements with telephone line providers and to the increased use of lower cost federal telephone numbers by our subscribers in the Moscow license area and the regions. We pay no monthly rental fee and incur much
lower interconnection costs for federal telephone numbers as compared to local telephone numbers. As a percentage of net operating revenues, our service costs decreased to 14.3% during 2003 from 14.5% during 2002.



Cost of handsets and accessories sold.Our cost of handsets and
accessories sold increased by 29.2% to US$54.0 million during 2003 from US$41.8 million during 2002. This increase was primarily due to the increased volume of sales of handsets and SIM cards. Although our total cost of handsets and accessories sold
increased, because of the faster rate of growth in net operating revenues, which grew at a rate of 73.8%, our cost of handsets and accessories sold as a percentage of net operating revenues declined to 4.0% during 2003 compared to 5.4% during 2002.



Selling, general and administrative expenses.Our
selling, general and administrative expenses increased 71.9% to US$467.7 million during 2003 from US$272.0 million during 2002. The increase in selling, general and administrative expenses resulted from increased aggregate subscriber acquisition
costs and general and administrative expenses related to our regional expansion, including the integration of an acquisition during 2003, which was partially offset by decreases in average dealer commission per subscriber and our advertising expense
per subscriber. At the same time, our SAC decreased from US$25.7 during 2002 to US$19.3 during 2003, primarily due to a decrease in the amount spent on advertising per new subscriber and because a growing percentage of our new subscribers were
located in the regions, where SAC is lower than in the Moscow license area. See Non-U.S. GAAP Financial Measures for more information regarding our use of SAC as a non-U.S. GAAP financial measure. The decrease in the amounts spent
on advertising per subscriber is due primarily to economies of scale. In this respect, we derive significant benefits from our brand name, which is one of the most recognized brand names in Russia. As a percentage of net operating revenues, our
selling, general and administrative expenses remained substantially the same during 2003 and 2002 at 35.0% and 35.4%, respectively.



Depreciation and amortization expense.Our depreciation and amortization expense during 2003 was US$185.3 million, a 90.2% increase compared to the
US$97.4 million reported during 2002. In 2003, the depreciation and amortization expense for our Moscow license area operations increased by 39.5% to US$120.5 million, compared to US$86.4 million during 2002, while depreciation and amortization
expense for our regional operations increased by 473.5% to US$64.8 million compared to US$11.3 million during 2002. The total increase in depreciation and amortization expense was due to the accelerated capital expenditures in the regions and
continued investment in the Moscow license area.



Provision
for doubtful accounts.Our provision for doubtful accounts decreased by 56.6% to US$9.2 million during 2003 from US$21.2 million during 2002. As a percentage of net operating revenues, provision for doubtful accounts decreased from 2.8% during
2002 to 0.8% during 2003. The decrease was primarily due to an increase in the number of prepaid subscribers, improved risk management practices and improved cash collection procedures.



Operating Income/Loss



Primarily as a result of the foregoing, our operating income was US$427.9 million during 2003, compared to US$224.8 million during 2002. In 2003, our
Moscow license area operating income grew by 36.6% to



90



---

##### Table of Contents

US$325.8 million compared to US$238.5 million during 2002, which was primarily attributable to the growth of our Moscow license area subscriber base and
managements efforts to decrease costs. Our operating income from regional operations increased by 900.0% to US$103.2 million compared to our operating loss of US$12.9 million during 2002. In previous years, operating losses were primarily
attributable to expenses connected with the greenfield development of our regional networks and the low number of subscribers during the initial stage of development of our business in the regions. The primarily greenfield development of our
regional networks requires us to have significant infrastructure in place prior to offering services to, and thus receiving revenue from, our regional subscribers. This accelerated development of our infrastructure in the regions during 2001 and
2002 resulted in a significant increase in our capital expenditures and, consequently, depreciation and amortization expenses, as well as our selling, general and administrative expenses. In 2003, when full commercial usage of our telecommunications
networks in the regions began, the number of subscribers grew substantially, which resulted in a sharp increase in our operational revenues during 2003. Over the next several years, we currently anticipate that our revenues in the regions will
continue to grow.



Other Income and Expenses



Interest expense.Our interest expense increased 46.4% to US$68.2
million during 2003, compared to US$46.6 million during 2002. The increase in our interest expense during 2003 was primarily attributable to the interest expenses associated with the loan from J.P. Morgan AG (funded by the issuance of loan
participation notes by J.P. Morgan AG) and the Russian ruble-denominated bond issued by our subsidiary VimpelCom Finance in May 2003.



Foreign currency exchange loss.We recorded a US$1.3 million foreign currency exchange loss during 2003 as compared to a foreign currency exchange
loss of US$9.4 million during 2002. The devaluation of the U.S. dollar against the Euro during 2002 and 2003 resulted in a significant foreign exchange loss during 2002 from a corresponding revaluation of our Euro-denominated liabilities to our
suppliers of telecommunications equipment. In order to reduce our Euro-U.S. dollar currency exposure, in August 2002 we entered into a series of currency forward agreements to acquire approximately 89.9 million at a fixed Euro to U.S. dollar
exchange rate. During 2003 we continued to enter into currency forward agreements. As of December 31, 2003, substantially all of our Euro-denominated liabilities that were not covered by these forward agreements were covered by our cash holdings,
denominated in Euros, in the approximate amount of 22.0 million. Our foreign exchange loss during 2003 was primarily due to the difference between rates on translation of forward agreements (forward rate) and liabilities (spot rate).



Income tax expense.During 2003, we recorded a US$108.6
million income tax expense compared to an income tax expense of US$49.9 million recorded during 2002. This income tax expense consisted of current and deferred taxes. Deferred taxes arose due to differences between the basis of computing income
under Russian tax principles and U.S. GAAP. In 2003, our income tax expense grew as a result of the increase in our taxable income. Our effective income tax rate of 29.4% during 2003 was approximately the same as our effective income tax rate of
28.1% in 2002.



Net income and net income per share.In
2003, our net income was US$234.0 million, or US$6.12 per common share (US$4.59 per ADS), compared to a net income of US$129.6 million, or US$3.41 per common share (US$2.56 per ADS) during 2002. In 2003, we reported diluted net income of US$5.22 per
common share (US$3.92 per ADS), compared to diluted net income of US$2.91 per common share (US$2.18 per ADS) during 2002. In 2003, before eliminating intersegment transactions, net income for our Moscow license area operations was US$197.2 million,
compared to US$150.6 million during 2002. Net income before minority interest in the regions during 2003 amounted to US$62.4 million before eliminating intersegment transactions, compared to US$23.2 million loss before minority interest during 2002.



91



---

##### Table of Contents

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001



Operating Revenues



Our total operating revenues, net of revenue-based taxes, increased by 81.9% to US$768.5 million during 2002 from US$422.6
million during 2001. Our total operating revenues increased by 82.2% to US$779.6 million during 2002 from US$427.9 million during 2001. Total operating revenues from our Moscow license area operations increased by 67.6% to US$698.7 million during
2002 from US$416.9 million during 2001. Total operating revenues from our operations in the regions increased by 636.4% to US$81.0 million during 2002 from US$11.0 million during 2001. Revenues from our Moscow license area operations constituted
89.6% of our total operating revenues during 2002 compared to 97.4% during 2001. Revenue growth was primarily due to the overall increase in the number of our subscribers, an increase in our revenues from value added services and an increase in our
roaming revenues. Our increase in roaming revenues was primarily due to the improved and expanded roaming coverage and a greater number of roaming partners.



Service revenues and connection fees increased by 89.9% to US$727.9 million during 2002 from US$383.3 million during 2001. Revenues from sales of handsets
and accessories during 2002 increased 15.5% to US$49.9 million during 2002 from US$43.2 million during 2001, primarily due to the increase in the number of our subscribers. As a percentage of net operating revenues, revenues from sales of handsets
and accessories decreased to 6.5% during 2002 from 10.2% during 2001, as our service revenues increased at afaster rate than our revenues from sales of handsets and accessories.



Operating Expenses



Service costs.Our service costs increased approximately 50.3% to US$111.4 million during 2002 from US$74.1 million during 2001. Our service costs
grew at a slower rate than net operating revenues, which led to an improvement in our gross margin percentage from 73.6% during 2001 to 80.1% during 2002. Gross margin is defined as net operating revenues less selected operating costs (specifically,
service costs, costs of handsets and accessories sold and costs of other revenues). Gross margin percentage is defined as gross margin expressed as a percentage of net operating revenues.



The slower growth in service costs relative to net operating revenues was primarily due to improved interconnect agreements
with telephone line providers and in part to the increased use of federal numbers by our subscribers in the Moscow license area and the regions. We pay no monthly rental fee and incur much lower interconnection costs for federal telephone numbers as
compared to local telephone numbers. As a percentage of net operating revenues, our service costs decreased to 14.5% during 2002 from 17.5% during 2001.



Cost of handsets and accessories sold.Our cost of handsets and accessories sold increased by 11.2% to US$41.8 million during 2002 from US$37.6
million during 2001. This increase was primarily due to the increased volume of sales of handsets and SIM cards.



Selling, general and administrative expenses.Our selling, general and administrative expenses increased 82.4% to US$272.0 million during 2002 from
US$149.1 million during 2001. The increase in selling, general and administrative expenses resulted from increased aggregate subscriber acquisition costs and general and administrative expenses related to our regional expansion, including the
integration of companies acquired during 2002, which was partially offset by decreases in dealer commissions and our advertising expenses per subscriber. At the same time, our SAC decreased from US$37.6 during 2001 to US$25.7 during 2002, primarily
due to a decrease in average dealer commission per new subscriber in the first half of 2002, a decrease in the amount spent on advertising per new subscriber and because a growing percentage of our new subscribers were located in the regions, where
SAC is lower than in the Moscow license area. See Non-U.S. GAAP Financial Measures for more information regarding our use of SAC as a non-U.S. GAAP financial measure. As a percentage of net operating revenues, our selling, general
and administrative expenses were 35.4% during 2002, substantially unchanged from 35.3% during 2001. As a percentage of our selling, general and administrative expenses, aggregate subscriber acquisition costs decreased to 36.8% during 2002 from 38.8%
during 2001.



92



---

##### Table of Contents

Depreciation and amortization expense.Depreciation and amortization expense during 2002 was
US$97.4 million, a 58.9% increase compared to the US$61.3 million reported during 2001. In 2002, depreciation and amortization expense for our Moscow license area operations increased by 45.7% to US$86.4 million, compared to US$59.3 million during
2001, while depreciation and amortization expense for our regional operations increased by 438.1% to US$11.3 million, compared to US$2.1 million during 2001. The total increase in depreciation and amortization expense was due to the accelerated
capital expenditures in the regions and continued investment in the Moscow license area.



Provision for doubtful accounts.Our provision for doubtful accounts increased 58.2% to US$21.2 million during 2002 from US$13.4 million during 2001. This increase was primarily a result of our revenue growth.
As a percentage of net operating revenues, provision for doubtful accounts decreased from 3.2% during 2001 to 2.8% during 2002. The decrease was primarily due to an increase in the number of prepaid subscribers, improved risk management practices
and improved cash collection procedures.



Operating Income/Loss



Primarily as a result of the foregoing, our operating
income was US$224.8 million during 2002, compared to US$87.2 million during 2001. In 2002, our Moscow license area operating income grew by 152.6% to US$238.5 million compared to US$94.4 million during 2001, which was primarily attributable to the
growth of our Moscow subscriber base and our cost management efforts. Our operating loss from regional operations increased by 92.5% to US$12.9 million compared to our operating loss of US$6.7 million during 2001, which was primarily attributable to
expenses connected with the greenfield development of our regional networks and the low number of subscribers during the initial stage of development of our business in the regions. The primarily greenfield development of our regional networks
requires us to have significant infrastructure in place prior to offering services to, and thus receiving revenue from, our regional subscribers. This accelerated development of our infrastructure in the regions during 2002 has resulted in a
significant increase in our capital expenditures and, consequently, depreciation and amortization expenses, as well as our selling, general and administrative expenses. Over the next several years, we anticipate that our revenues in the regions will
grow relative to our regional operating expenses as we continue to roll-out operations and grow our subscriber base.



Other Income and Expenses



Interest expense.Our interest expense increased 73.2% to US$46.6 million during 2002, compared to US$26.9 million during 2001. This increase was
due to an increase in our interest bearing debt, primarily the 2002 loan from J.P. Morgan AG (funded by the issuance of loan participation notes by J.P. Morgan AG), certain vendor financing and bank credit lines from US$277.7 million at the end of
2001 to US$650.6 million at the end of 2002.



Foreign
currency exchange loss and gain on Russian securities.We recorded a US$9.4 million foreign currency exchange loss during 2002 as compared to a foreign currency exchange loss of US$0.1 million during 2001. The devaluation of the U.S. dollar
against the Euro during 2002 resulted in a foreign exchange loss from a corresponding revaluation of our Euro-denominated liabilities to our suppliers of telecommunications equipment. In order to reduce our Euro-U.S. dollar currency exposure, in
August 2002 we entered into a series of currency forward agreements to acquire approximately 89.9 million at a fixed Euro to U.S. dollar exchange rate. As of December 31, 2002, substantially all of our Euro-denominated liabilities that were
not covered by these forward agreements were covered by our cash holdings, denominated in Euros, in the approximate amount of 39.1 million. We recorded a US$0.04 million gain during 2002 from the sale of Russian securities as compared to a
US$0.42 million gain during 2001.



Income tax expense.In 2002, we recorded a US$49.9 million income tax expense compared to an income tax expense of US$18.5 million recorded during 2001. This income tax expense consisted of current and deferred taxes. Deferred taxes arose due to differences between
the basis of computing income under Russian tax principles and U.S. GAAP. In 2002, our income tax expense grew as our taxable income increased.



93



---

##### Table of Contents

Net income and net income per share.In 2002, our net income was approximately US$129.6 million,
or US$3.41 per common share (US$2.56 per ADS), compared to a net income of approximately US$47.3 million, or US$1.41 per common share (US$1.06 per ADS) during 2001. In 2002, we reported diluted net income of US$2.91 per common share (US$2.18 per
ADS), compared to diluted net income of US$1.18 per common share (US$0.89 per ADS) during 2001. In 2002, before eliminating intersegment transactions, net income for our Moscow license area operations was US$150.6 million, compared to US$55.0
million during 2001. Net loss before minority interest in the regions for 2002 amounted to US$23.2 million before eliminating intersegment transactions, compared to US$7.0 million during 2001.



Liquidity and Capital Resources



Consolidated Cash Flow Summary



|                                                             |  |                          |        |   |      |     |        |      |  |     |        |  
|------------------------------------------------------------ |  | ------------------------ | ------ | - | ---- | --- | ------ | ---- |  | --- | ------ | -
|                                                             |  | Years Ended December 31, |       
|                                                             |  | 2003                     |        |   | 2002 |     |        | 2001 | 
|Net cash flow provided by operating activities               |  | US$                      | 511.9  |   |      | US$ | 221.7  |      |  | US$ | 101.1  |  
|Net cash flow (used in) provided by financing activities     |  |                          | (36.1  | ) |      |     | 294.5  |      |  |     | 53.9   |  
|Net cash flow used in investing activities                   |  |                          | (594.0 | ) |      |     | (401.9 | )    |  |     | (161.7 | )
|Effect of exchange rate changes on cash and cash equivalents |  |                          | 12.2   |   |      |     | 5.2    |      |  |     | (1.3   | )
|Net cash flow                                                |  |                          | (106.0 | ) |      |     | 119.5  |      |  |     | (8.0   | )



During 2003, 2002 and
2001 we generated positive cash flows from our operating activities and negative cash flows from investing activities. Cash flow from financing activities was negative during 2003 and positive during 2002 and 2001. The negative cash flow from
financing activities during 2003 was a result of our repayment of the current portion of our interest-bearing liabilities, including equipment financing obligations to Alcatel and Ericsson in the amount of US$244.2 million. In the foreseeable
future, our further expansion will require significant investment activity, including the acquisition of network equipment and possibly the acquisition of other companies. Additionally, approximately US$214.7 million of our contractual obligations
will mature prior to December 31, 2004 and US$327.6 million prior to December 31, 2005. We expect our near term investment activity and contractual obligations payments to generate cash outflows, and we expect to meet these needs from internal and
external sources. As our subscriber base grows, we expect positive cash flows from operations to continue to provide us with internal sources of funds. The availability of external financing is difficult to predict because it depends on many
factors, including the success of our operations, contractual restrictions, availability of Export Credit Agency, or ECA, guarantees, the financial position of Russian banks, the willingness of international banks to lend to Russian companies and
the liquidity of international and Russian capital markets. Historically, a large portion of our external financing needs was satisfied by vendor financing and financing through the international capital markets. However, in light of current market
conditions, we currently intend to reduce our use of vendor financing and increasingly look to international and Russian capital markets and ECA backed credits for our financing needs. Under our current business plan, we plan to raise up to US$600.0
million in additional debt financing in the Russian and/or international capital markets and/or in bank financing to meet our projected capital requirements through 2005.



As of December 31, 2003, our cash and cash equivalents balance was US$157.6 million (primarily held in U.S. dollars, Russian
rubles and Euros) compared to US$263.7 million as of December 31, 2002. As of December 31, 2003 we had negative working capital of US$167.4 million, compared to positive working capital of US$69.6 million as of December 31, 2002. Working capital is
defined as current assets less current liabilities. Deposits and advances from customers are primarily redeemed by provision of telecommunications services and may be claimed by subscribers in limited circumstances. Historically customer deposits
and advances have been claimed at a very low rate, and, therefore, we are capable of using customer deposits and advances as a permanent financing source. As of December 31, 2003, customer deposits and advances amounted to US$181.5 million compared
to US$106.7 million as of December 31, 2002. The growth in customer deposits and advances during 2003 was the result of the increase in the volume of our operations. We expect customer deposits and advances to continue to grow in line with the
growth of our operations.



94



---

##### Table of Contents

The decrease in our working capital during 2003 was primarily due to a decrease in our cash and cash
equivalents and other current assets, augmented by an increase in the current portion of interest-bearing liabilities, accounts payable, accrued liabilities and customer deposits and advances. The increase in our working capital during 2002 from
US$52.1 million as of December 31, 2001 was primarily due to the increase in our cash and cash equivalents and other current assets, offset by an increase in the current portion of interest-bearing liabilities, accounts payable, accrued liabilities
and customer deposits and advances. We believe that our working capital is sufficient to meet our present requirements.



Operating activities



During 2003, net cash provided by operating activities was US$511.9 million, a 130.9% improvement from US$221.7 million of net cash provided by operating
activities during 2002. During 2002, net cash provided by operating activities was US$221.7 million, a significant improvement from net cash provided by operating activities during 2001 of US$101.1 million. The improvement in net cash from operating
activities during 2003 and 2002 was primarily due to the increased profitability of our operations and the increase in the volume of operations, which, in turn, was primarily the result of an increase in the number of subscribers during 2003
compared to 2002. In 2003, there were no significant changes in the terms of payments to our suppliers and our policies in respect of customer advances and accounts as compared to 2002.



Financing activities



The following table provides a summary of the outstanding material indebtedness of our company and our significant subsidiaries as of December 31, 2003.
Upon the consummation of the mergers of VimpelCom-Region and KB Impuls into VimpelCom, VimpelCom shall become the obligor under the indebtedness of VimpelCom-Region and KB Impuls, respectively. For additional information on this debt, please refer
to the discussion below, as well as to the notes to our consolidated financial statements contained elsewhere in this Annual Report on Form 20-F. For a description of some of the risks associated with certain of this indebtedness, please refer to
the section of this Annual Report on Form 20-F entitled Item 3Key InformationD. Risk Factors.



|                  |  |                                                                                                 |  |                                                                              |  |                                   |  |                                              |  |                  |  |                  
|----------------- |  | ----------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- |  | --------------------------------- |  | -------------------------------------------- |  | ---------------- |  | -----------------
|Borrower          |  | Type of debt                                                                                    |  | Interest rate                                                                |  | Outstandingdebt(in millions)      |  | Maturity date                                |  | Guarantor        |  | Security         
|VimpelCom         |  | Loan from J.P. Morgan AG (funded by the issuance of loan participation notes by J.P. Morgan AG) |  | 10.45%                                                                       |  | US$250.0                          |  | April 26, 2005                               |  | None             |  | None             
|                  |  |                                                                                                 |  |                                                                              |  |                                  
|VimpelCom Finance |  | Ruble denominated bonds                                                                         |  | 8.80% (subject to adjustment by VimpelCom Finance no later than May 7, 2004) |  | US$101.9 (3,000.0 Russian rubles) |  | May 16, 2006 with put option on May 18, 2004 |  | VimpelCom-Region |  | None             
|                  |  |                                                                                                 |  |                                                                              |  |                                  
|KB Impuls         |  | Equipment financing obligations to Alcatel                                                      |  | Six-month EURIBOR plus 3.5% and six-month EURIBOR plus 2.9%                  |  | US$82.7 (66.2)                   |  | Various dates through 2006                   |  | VimpelCom        |  | Network equipment



95



---

##### Table of Contents

|                       |  |                                                                                |  |                              |  |                              |  |                                         |  |                                         |  |                                                               
|---------------------- |  | ------------------------------------------------------------------------------ |  | ---------------------------- |  | ---------------------------- |  | --------------------------------------- |  | --------------------------------------- |  | --------------------------------------------------------------
|Borrower               |  | Type of debt                                                                   |  | Interest rate                |  | Outstandingdebt(in millions) |  | Maturity date                           |  | Guarantor                               |  | Security                                                      
|                       |  |                                                                                |  |                              |  |                             
|VimpelCom-Region       |  | Loan from Sberbank                                                             |  | 11.5%                        |  | US$70.0                      |  | August 27, 2007                         |  | VimpelCom(US$50.0)                      |  | Equipment and promissory notes issued by VimpelCom-Region     
|                       |  |                                                                                |  |                              |  |                             
|VimpelCom              |  | Loan from Nordea Bank Sweden AB (publ) and Bayerische Hypo- und Vereinsbank AG |  | Annual LIBOR plus 0.7%       |  | US$24.9                      |  | August 28, 2006                         |  | EKN(SwedishExportCreditsGuaranteeBoard) |  | Network equipment                                             
|                       |  |                                                                                |  |                              |  |                             
|VimpelCom-Region       |  | Promissory Notes issued to Technoserv                                          |  | 10.0% and 8.0%               |  | US$18.9 (2.6 and US$15.6)   |  | Various dates through 2006              |  | None                                    |  | None                                                          
|                       |  |                                                                                |  |                              |  |                             
|VimpelCom              |  | Loan from Sberbank                                                             |  | 9.5%                         |  | US$16.7                      |  | April 28, 2004                          |  | None                                    |  | Common stock of certain subsidiaries, equipment, and buildings
|                       |  |                                                                                |  |                              |  |                             
|VimpelCom              |  | Leasing agreement with Investelektrosvyaz (Corbina-Telecom)                    |  | N/A                          |  | US$14.9                      |  | March 2007                              |  | None                                    |  | Title to network equipment retained by lessor                 
|                       |  |                                                                                |  |                              |  |                             
|VimpelCom-Region       |  | Equipment financing obligations to Alcatel                                     |  | Six-month EURIBOR plus 2.9%, |  | US$11.6 (9.3)               |  | Various dates through December 27, 2005 |  | VimpelCom                               |  | Network equipment                                             
|                       |  |                                                                                |  |                              |  |                             
|VimpelCom subsidiaries |  | Bank loans, equipment financing obligations and capital lease                  |  | Various rates                |  | US$8.3                       |  | Various                                 |  | None                                    |  | Various                                                       
|                       |  |                                                                                |  |                              |  |                             
|VimpelCom              |  | Promissory Notes issued to General DataCom                                     |  | Six-month LIBOR plus 2.0%    |  | US$4.4                       |  | Various dates through 2006              |  | None                                    |  | None                                                          
|                       |  |                                                                                |  |                              |  |                             
|VimpelCom              |  | Promissory Notes issued to Technoserv                                          |  | 10.0%                        |  | US$2.7 (0.5 and US$2.1)     |  | Various dates through 2005              |  | None                                    |  | None                                                          



2001. In 2001,
we completed a transaction with Alfa Group to fund our regional expansion. Specifically, on November 5, 2001, Alfa Group completed the purchase of 5,150,000 newly-issued shares of our common stock for US$103.0 million. Pursuant to the terms of the
transaction agreements, which were signed on May 30, 2001, we contributed this US$103.0 million (together with an additional US$15.6 million of our own funds, at the exchange rate as of the date of contribution) as equity to VimpelCom-Region,
representing the first of three tranches of equity investments in which VimpelCom-Region raised US$337.0 million. In addition to a purchase



96



---

##### Table of Contents

of shares from another shareholder, in order to maintain its percentage ownership interest in our company, Telenor purchased 3,744 shares of our common stock
that we were holding as treasury shares for a purchase price of approximately US$74,880. Alfa Group recently reported that it owned 25.0% plus two shares of our voting capital stock and Telenor recently reported that it owned 25.0% plus 13 shares of
our voting capital stock.



2002. In 2002, we entered
into three key financing transactions to finance our scheduled capital expenditures, including capital expenditures in the regions.



In April 2002, J.P. Morgan AG completed an offering of 10.45% loan participation notes due 2005 for the sole purpose of funding a US$250.0 million loan to
our company. The loan participation notes are listed on the Luxembourg Stock Exchange and are without recourse to J.P. Morgan AG. The loan and the Loan Participation Notes will mature in April 2005. Interest on the loan and the loan participation
notes is payable semi-annually at a rate of 10.45% per annum. The loan agreement contains certain covenants that, among other things and subject to certain exceptions, limit our ability to incur liens and restrict our ability to make certain
payments, including dividends, payments for certain shares of stock, payments of subordinated indebtedness of our company and certain investments. In addition, these covenants limit our ability to enter into transactions with affiliates and to
effect a merger of our company with other entities.



In
November 2002, we completed the second tranche of equity investments in VimpelCom-Region when Alfa Group, Telenor and our company each purchased 1,462 newly-issued shares of common stock for consideration of US$58.5 million each. In addition, the
preferred stock beneficially owned by Alfa Group was redistributed among Alfa Group, our company and Telenor so that each party owns the same percentage of the voting capital stock of VimpelCom-Region that each would have owned had the preferred
stock not been issued to Alfa Group. Following the completion of the second tranche of equity investments in VimpelCom-Region and the redistribution of the preferred stock, we owned approximately 65.0% of the outstanding voting capital stock of
VimpelCom-Region, while Alfa Group and Telenor each owned approximately 17.5% of the outstanding voting capital stock of VimpelCom-Region. The capital contributions of Alfa Group and Telenor each exceeded their respective share of net assets of
VimpelCom-Region by US$23.1 million. This gain on the sale of newly-issued shares of common stock of VimpelCom-Region was included in our consolidated additional paid-in capital. In addition, the capital contributions of Alfa Group and Telenor
resulted in an increased minority interest in net losses of VimpelCom-Region for 2002.



In December 2002, Sberbank provided VimpelCom-Region with a five-year U.S. dollar-denominated secured credit line of US$70.0 million. In 2002, VimpelCom-Region drew down US$39.4 million of the credit line and, as of
March 27, 2003, VimpelCom-Region had drawn down the full amount of the credit line. In August 2003 Sberbank decreased the initial interest rate on this loan from 13.0% per annum to 11.5% per annum. In April 2004 Sberbank decreased the interest rate
on this loan from 11.5% per annum to 8.5% per annum, which may change again upon the occurrence of certain events, such as a change in Russian law or a change in the interest rate of the Central Bank of Russia. The credit line will be repaid on a
quarterly basis commencing in November 2004. The last repayment is scheduled for August 2007. The credit line is currently secured by:



| |  | a guarantee from our company for US$50.0 million;
| | - | -------------------------------------------------



| |  | a pledge of a portion of VimpelCom-Regions GSM network equipment; and
| | - | ----------------------------------------------------------------------



| |  | a pledge of certain promissory notes issued by VimpelCom-Region.
| | - | ----------------------------------------------------------------



VimpelCom-Regions credit line with Sberbank contains certain restrictive covenants that, among other things, limit bank borrowings by
VimpelCom-Region and certain of its subsidiaries and requires that 60.0% of VimpelCom-Regions aggregate credit turnover (as defined in the relevant documentation) be through Sberbank. This 60.0% figure will be reduced pro rata as we repay the
loan.



2003. On May 20, 2003, we issued Russian
ruble-denominated bonds through Limited Liability Company VimpelCom Finance, or VimpelCom Finance, a consolidated Russian subsidiary of our company, in an aggregate



97



---

##### Table of Contents

principal amount of 3 billion Russian rubles, or approximately US$101.9 million at the Central Bank of Russia exchange rate on December 31, 2003. The bonds
are guaranteed by VimpelCom-Region and are scheduled for repayment on May 16, 2006. Interest on the bonds is payable semi-annually. Bondholders have a put option exercisable between May 9 and May 18, 2004 at 100.0% of the nominal value of the bonds.
The annual interest rate for the first two interest payments is 8.8%. The interest rate for subsequent interest payments will be 9.9%. The proceeds of the Russian ruble-denominated bond offering were used for financing and refinancing the business
operations of VimpelCom-Region and its consolidated subsidiaries.



On August 28, 2003, in anticipation of the announced merger between VimpelCom and VimpelCom-Region, Alfa Group accelerated the third tranche of its investment into VimpelCom-Region in the amount of approximately $58.5 million. This
investment was originally scheduled for November 2003.



On
November 20, 2003, we announced that our wholly-owned subsidiary VimpelCom B.V. called for redemption on December 22, 2003 of all of the 5.5% senior convertible notes due 2005 that were issued by VimpelCom B.V. Between November 20, 2003 and December
17, 2003, holders of the convertible notes converted their notes with an aggregate principal amount of US$66.2 million into 2,449,011 ADSs of our company at the specified conversion price per ADS. Prior to November 20, 2003, holders of notes with an
aggregate principal amount of US$7.8 million converted their notes into 288,554 ADSs of our company. The total face value of the converted notes was US$74.0 million. On December 22, 2003, we remitted to The Bank of New York the funds to redeem the
outstanding unconverted notes with an aggregate principal amount of US$1.0 million. The outstanding notes were redeemable at US$1,241.76 per US$1,000 principal amount of the notes. The redemption amount consisted of the redemption price of $1,219.76
per US$1,000 principal amount of the notes, plus US$22.00 of accrued and unpaid interest thereon between July 28, 2003 and December 22, 2003.



In April 2003, VimpelCom-Region entered into a short-term bridge loan facility with ZAO Raiffeisen Bank Austria for a maximum amount of 640.0 million
Russian rubles or approximately US$20.5 million. The maturity date of the loan was July 31, 2003 and the loan bore interest at 14.0% per annum. VimpelCom-Region borrowed 585.0 million Russian rubles, or approximately US$18.9 million, under this loan
and repaid the entire amount of the loan from proceeds of the Russian ruble denominated bond issuance.



2004.In April 2004, Sberbank provided our company with a five-year U.S. dollar-denominated secured non-revolving credit line of US$130.0 million.
The credit line bears interest at the rate of 8.5% per annum, which may change upon the occurrence of certain events, such as a change in Russian law or a change in the interest rate of the Central Bank of Russia. The credit line is repayable in
eight equal quarterly installments over a two-year period, beginning on February 27, 2007 and ending April 14, 2009. To date, we have not drawn down any amount under this facility. The end of the drawdown period under the credit line falls on April
15, 2005. The credit line will be secured by a pledge of telecommunications equipment, shares in certain of our directly and indirectly owned subsidiaries and real estate. Our companys ability to draw upon the credit line is conditioned upon
our companys ability to pledge assets with a value sufficient to fully secure the borrowings under the credit line. The proceeds of the credit line may be used to finance the expansion of our business. The credit line with Sberbank contains
certain restrictive covenants that, among other things, limit borrowings by our company and certain of our subsidiaries and requires that a specified amount of our companys aggregate credit turnover (as defined in the relevant documentation)
be through Sberbank. The credit line also contains a financial covenant requiring that our companys ratio of interest expense to OIBDA on a consolidated basis not exceed 3.0.



Equipment Financing. The following is a summary of our key arrangements of this type.



1996. In May 1996, KB Impuls entered into a vendor financing agreement
with Alcatel in connection with the purchase of equipment for the build-out of our GSM networks. As of December 31, 2003, KB Impulss



98



---

##### Table of Contents

indebtedness to Alcatel was US$82.7 million. This indebtedness is guaranteed by our company and was incurred at various times, commencing in 1996, and bears
interest at, six-month EURIBOR plus 3.5% (for orders signed from August 2000 through December 31, 2001) and six-month EURIBOR plus 2.9% (for orders signed since January 1, 2002). This indebtedness is secured by the equipment acquired from Alcatel
with the proceeds of the financing and is due on various dates through 2006. KB Impulss vendor financing agreements with Alcatel contain certain restrictive covenants, which provide, among other things, that KB Impuls may not pledge, encumber
or grant a lien or security interest over KB Impulss revenues, properties and rights to receive income as security for indebtedness of KB Impuls (subject to certain exceptions). In addition, these financing agreements require KB Impuls to
first obtain Alcatels consent before entering into material contracts outside of the ordinary course of business or material contracts with any shareholder of KB Impuls (namely VimpelCom or an affiliate of our company), with limited
exceptions. These vendor financing agreements permit KB Impuls to pay dividends in any year to our company or any other of its shareholders in an amount not greater than 80.0% of KB Impulss net profit for that year provided certain conditions
are met. In addition, KB Impuls may not, without Alcatels prior consent, make a loan or advance to any person, with limited exceptions. For more information on the risks related to these covenants, see the section of this Annual Report on Form
20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessWe may not be able to recover, or realize the value of, the debt investments that we make in KB Impuls or other subsidiaries.



2001. In September 2001, VimpelCom-Region entered into
a vendor financing agreement with Alcatel providing for financing of an amount up to 18.3 million. This indebtedness is guaranteed by our company, secured by the equipment acquired from Alcatel with the proceeds of the financing and bears
interest at the rate of six-month EURIBOR plus 2.9%. This indebtedness was due on various dates through September 2002 and was originally priced at three-month EURIBOR plus 2.0%. In December 2002, we repaid 4.6 million, changed the interest
rate to its current level and extended the maturity on the remaining indebtedness so that it is due on various dates through December 27, 2005. As of December 31, 2003, approximately US$11.6 million (including accrued interest) was outstanding under
all of VimpelCom-Regions vendor financing agreements with Alcatel. VimpelCom-Region repaid all outstanding amounts on the vendor financing agreements with Alcatel in April 2004.



2002. In April 2002, we entered into a frame agreement with LLC Technoserv A/S, or Technoserv, providing for the
supply of telecommunications equipment, which includes an unsecured credit arrangement whereby we initially agreed to pay for 85.0% of the purchase price of the equipment with our promissory notes and 15.0% in cash. As of December 31, 2003, total
debt under this facility including accrued interest was US$2.7 million and we had delivered promissory notes to Technoserv with an aggregate carrying value of US$2.8 million. This amount includes Euro-denominated promissory notes with an aggregate
carrying value of 0.44 million (approximately US$0.55 million) and a face value of 0.54 million (approximately US$0.66 million) and U.S. dollar-denominated promissory notes with an aggregate carrying value of US$1.9 million and a face
value of US$2.5 million. Our outstanding promissory notes were issued at a discount with an effective annual interest rate of 10.0%. Each completed delivery of equipment is paid for with a pool of promissory notes. Each pool has a maximum term of
three years and promissory notes in each pool mature quarterly.



In May 2002, VimpelCom-Region entered into a frame agreement with Technoserv providing for the supply of telecommunications equipment. Under the terms of this agreement, VimpelCom-Region initially agreed to pay for 85.0% of the purchase
price of the equipment with its promissory notes and 15.0% in cash. As of December 31, 2003, total debt under this facility including accrued interest was US$18.9 million and VimpelCom-Region had delivered or will be required to deliver promissory
notes to Technoserv with an aggregate carrying value of US$18.9 million. This amount includes Euro-denominated promissory notes with an aggregate carrying value of 1.9 million (approximately US$2.4 million) and a face value of 2.1
million (approximately US$2.6 million), U.S. dollar-denominated promissory notes with an aggregate carrying value of US$14.2 million and a face value of US$15.6 million, and 2.0 million (approximately US$2.6 million) in promissory notes to be
issued by VimpelCom-Region once Technoserv completes delivery and installment of certain equipment that VimpelCom-Region has purchased. Before May 30, 2003 VimpelCom-Regions outstanding promissory notes were issued at a discount with an
effective annual interest rate of 10.0% and after May 30, 2003 with an effective annual



99



---

##### Table of Contents

interest rate of 8.0%. Each completed delivery of equipment is paid for with a pool of promissory notes. Each pool has a maximum term of three years and
promissory notes in each pool mature quarterly.



In August
2002, we entered into a frame agreement with LLC General DataCom, or General DataCom, providing for the supply of telecommunications equipment. As with our Technoserv frame agreements, this agreement includes an unsecured credit
arrangement pursuant to which we initially agreed to pay 85.0% of the purchase price of the equipment with our promissory notes and 15.0% in cash. As of December 31, 2003, we had delivered promissory notes to General DataCom under this credit
arrangement with an aggregate carrying value of US$4.4 million and a face value of US$4.4 million. Our outstanding promissory notes bear an annual interest rate equal to six-month LIBOR (fixed at the moment each promissory note was issued) plus
2.0%. Each completed delivery of equipment was paid for with twelve promissory notes that mature in equal quarterly installments over three years.



2003. In January 2003, we entered into a non-revolving credit agreement with Bayerische Hypo- und Vereinsbank AG and Nordea Bank Sweden AB (publ)
with a credit limit of US$35.7 million. The credit line may only be used to finance the acquisition of Ericsson telecommunications equipment and particular advances are limited to 85.0% of the purchase price of the related equipment. The credit line
bears interest at the rate of six-month LIBOR plus 0.7%, which is payable semi-annually. Each of the three tranches under the credit line is repayable in six equal semi-annual installments over a three-year period. We commenced repaying this loan in
April 2003. The credit line is secured by a pledge of the related telecommunications equipment we acquired from Ericsson and a guarantee from the Swedish Export Credit Agency EKN. In addition to interest payments, we are obliged to pay
the Swedish Export Credit Agency a guarantee fee in the amount of 5.03% of the relevant tranche before our first draw down under each tranche. Our credit agreement with Bayerische and Nordea contains covenants substantially similar to the covenants
related to our loan from J.P. Morgan AG discussed above. However, we are permitted to prepay, with five business days notice, any amounts outstanding under the Bayerische and Nordea credit agreement. As of December 31, 2003 $24.8 million was
outstanding under this loan.



2004. In February 2004,
VimpelCom-Region entered into a non-revolving credit agreement with Svenska Handelsbanken AB (publ) with a credit limit of US$69.7 million. The credit line bears interest at the rate of six-month LIBOR plus 0.325%, which is payable semi-annually.
The credit line is repayable in fourteen equal semi-annual installments over a seven-year period. Repayment commences not later than November 20, 2004. The end of the delivery period for the purchased equipment falls on October 20, 2004. The credit
line is secured by a pledge of the telecommunications equipment acquired from Ericsson, a guarantee from the Swedish Export Credit Agency EKN and a guarantee from our company for 20.0% of the outstanding indebtedness under the loan. In
addition to interest payments, VimpelCom-Region is obligated to pay EKN a fee in the amount of 9.82% of the total commitment under this loan. The credit line may only be used to finance the acquisition of Ericsson telecommunications equipment and to
refinance the EKN Premium. VimpelCom-Regions credit agreement with Svenska Handelsbanken AB (publ) contains certain covenants that, among other things, limit VimpelCom-Regions ability to grant loans (with certain exceptions) and repay
its debt to our company (the minimal level of indebtedness to our company is set at $110.0 million). In addition, these covenants limit VimpelCom-Regions ability to effect a merger of VimpelCom-Region with other entities outside our group of
companies. However, VimpelCom-Region is permitted to prepay at interest payment dates any amounts outstanding under this loan. VimpelCom and Svenska Handelsbanken AB (publ) will amend and restate this credit agreement with VimpelCom as the borrower
upon completion of the proposed merger of VimpelCom-Region into VimpelCom. Svenska Handelsbanken AB (publ) and VimpelCom have already negotiated the terms of this amended and restated credit agreement. The interest rate, the repayment date and the
guarantee from the EKN will remain the same. VimpelComs guarantee of VimpelCom-Regions debt as described above and the restriction on VimpelCom-Regions ability to pay debt to VimpelCom will cease to exist under this credit facility
upon amendment and restatement of the credit agreement.



100



---

##### Table of Contents

Investing activities



We purchase network equipment, telephone line capacity, frequency allocations, buildings and other assets as a part of the ongoing development of our
wireless networks. In 2003, our total payments for purchases of equipment, intangible assets and other non-current assets were approximately US$563.9 million (compared to US$332.8 million during 2002 and US$154.9 million during 2001) and our
payments in respect of acquisitions (net of cash holdings of acquired companies) were approximately US$42.5 million (compared to US$69.2 million during 2002 and US$6.8 million during 2001). In 2003, payments for purchases of equipment, intangible
assets and other non-current assets for our Moscow license area operations were approximately US$269.4 million (compared to US$215.2 million for 2002 and US$102.2 million during 2001). We did not make any payments in respect of acquisitions in the
Moscow license area during 2003 (compared to US$0.02 million during 2002 and US$2.3 million during 2001 (net of cash holdings of acquired companies)). In 2003, our payments for purchases of equipment, intangible assets and other non-current assets
for our operations in the regions were approximately US$294.5 million (compared to US$117.6 million during 2002 and US$52.7 million during 2001) and our payments in respect of acquisitions (net of cash holdings of acquired companies) were
approximately US$42.5 million (compared to US$68.9 million during 2002 and US$4.5 million during 2001).



Our acquisitions during 2001, 2002 and 2003 are described below.



In January 2001, we acquired all of the outstanding shares of common stock of Closed Joint Stock Company MSS-Start, which operated under
the trade name Mobile Center, for approximately US$3.2 million. Mobile Center is a retail dealer for mobile communications companies.



In April 2001, VimpelCom-Region acquired 93.0% of the shares of common stock of Closed Joint Stock Company Cellular Company, or Cellular
Company, a wireless AMPS telecommunications operator in Novosibirsk, for approximately US$4.5 million. At the time of the acquisition, Cellular Company had 23,200 subscribers. In February 2002, VimpelCom-Region acquired an additional 5.0% of the
stock of Cellular Company for approximately US$0.2 million. The remaining 2.0% of Cellular Company is owned by our wholly-owned subsidiary, KB Impuls.



In July 2002, VimpelCom-Region acquired 107,084 common shares of Open Joint Stock Company Orensot, or Orensot, representing a 77.6% interest,
for a purchase price of approximately US$14.2 million. Orensot has a GSM-900/1800 license for the Orenburg region, which covers approximately 2.2 million people. At the time of the acquisition, Orensot had approximately 65,800 subscribers, including
46,100 GSM subscribers. In October 2002, VimpelCom-Region acquired an additional 29,274 shares, or 21.2%, of Orensot for a purchase price of approximately US$3.9 million. As of December 31, 2002, VimpelCom-Region owned 136,358 shares, or 98.8%, of
Orensot.



In October 2002, we acquired an additional 200
shares, or 1.0%, of common stock of Open Joint Stock Company Bee Line Samara, or Bee Line Samara, for a purchase price of approximately US$0.7 million, thereby increasing our interest in Bee Line Samara to 51.0%. Bee Line Samara has
D-AMPS and GSM-1800 licenses for the Samara region, which covers approximately 3.3 million people. At the time of the acquisition, Bee Line Samara had approximately 103,000 D-AMPS subscribers.



In December 2002, VimpelCom-Region acquired from Telenor and another
shareholder 100.0% of the outstanding shares of Extel for a purchase price of approximately US$25.3 million. VimpelCom-Region acquired 49.0% of these shares from Telenor. Extel has a GSM-900 license for the Kaliningrad region, which covers
approximately 0.9 million people. At the time of the acquisition, Extel had approximately 105,000 subscribers.



In December 2002, VimpelCom-Region acquired 100.0% of Limited Liability Company Vostok-Zapad Telecom, or Vostok-Zapad Telecom, for a purchase
price of approximately US$26.6 million. Vostok-Zapad Telecom has a GSM-1800 license for the Ural super-region and a dual band GSM-900/1800 license for the following territories within the Ural region: the Sverdlovsk region, the Kirov region, the
Kurgan region, the



101



---

##### Table of Contents

Republic of Komi, the Republic of Udmurtia and the Yamal-Nenets autonomous district. Approximately 24.3 million people live in the Vostok-Zapad Telecom
license area. At the time of the acquisition, Vostok-Zapad Telecom had no subscribers.



In January and September 2003, VimpelCom-Region acquired 90.0% and 10.0%, respectively, of the outstanding shares of StavTeleSot, the largest mobile telecommunications service provider in the Stavropol region.
VimpelCom-Region acquired 49.0% of these shares from Telenor. VimpelCom-Region paid an aggregate purchase price of approximately US$43.1 million for StavTeleSot. In addition, we agreed to extend a credit line to StavTeleSot in the amount of
approximately US$9.2 million in order for StavTeleSot to repay a bank loan previously guaranteed by Telenor.



Future capital requirements



Wireless service providers require significant amounts of capital to construct networks and attract subscribers. Our estimated capital expenditures for 2004 are approximately US$924.0 million, of which approximately 80.0% we currently
intend to invest in our network development and a portion of the remaining amount may be invested in acquiring existing wireless operators in various license areas and/or in the purchase of cellular licenses in these areas.



We anticipate that the funds necessary to meet our current capital
requirements and those to be incurred in the foreseeable future will come from:



| |  | cash currently held by our company;
| | - | -----------------------------------



| |  | operating cash flows;
| | - | ---------------------



| |  | Export Credit Agency guaranteed financing, including our non-revolving credit agreement with Svenska Handelsbanken AB (publ);
| | - | -----------------------------------------------------------------------------------------------------------------------------



| |  | borrowings under bank financings, including credit lines currently available to us; and
| | - | ---------------------------------------------------------------------------------------



| |  | debt financings from Russian and international capital markets.
| | - | ---------------------------------------------------------------



We believe that funds from a number of these sources, coupled with cash on hand, will be sufficient to meet our projected capital requirements for the
next 12 months.



In addition, on March 31, 2004, we announced
our intention to raise, subject to market and other conditions, approximately US$300.0 million of debt financing by the issuance of notes in the international bond markets. The offering of the notes is currently anticipated to close during the
second quarter of 2004, but there can be no assurance that we will be able to complete this proposed offering. The notes will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements. The information in this Annual Report on Form 20-F about the proposed offering of notes shall not constitute an offer to sell or the solicitation of an offer to buy the notes,
nor shall there be any sale of the notes in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state.



102



---

##### Table of Contents

Contractual Obligations



The following table summarizes the contractual principal maturities of our debt, including its current portion, and our minimum payments required under
our capital lease obligations and purchase obligations, each as of December 31, 2003. We expect to meet our contractual obligation payment requirements with cash flows from our operations and other financing arrangements.



|                                                                                                |  |                                                      |  |                          |  |                                   |  |                                   |  |                    
|----------------------------------------------------------------------------------------------- |  | ---------------------------------------------------- |  | ------------------------ |  | --------------------------------- |  | --------------------------------- |  | -------------------
|                                                                                                |  | Payments due by period (In millions of U.S. dollars)
|                                                                                                |  | Total                                                |  | Prior toDecember 31,2004 |  | January 1,2005 toDecember 31,2007 |  | January 1,2008 toDecember 31,2009 |  | AfterJanuary 1,2010
|Contractual Obligations(1)                                                                      |  |                                                      |  |                          |  |                                   |  |                                   |  |                    
|Bank loans                                                                                      |  | 115.5                                                |  | 35.3                     |  | 80.2                              |  |                                  |  |                   
|Loan from J.P. Morgan AG (funded by the issuance of loan participation notes by J.P. Morgan AG) |  | 250.0                                                |  |                         |  | 250.0                             |  |                                  |  |                   
|Equipment financing (including accrued interest)                                                |  | 123.9                                                |  | 70.9                     |  | 53.0                              |  |                                  |  |                   
|Ruble denominated bonds(2)                                                                      |  | 101.9                                                |  | 101.9                    |  |                                  |  |                                  |  |                   
|Capital lease obligations                                                                       |  | 15.7                                                 |  | 6.6                      |  | 9.1                               |  |                                  |  |                   
|Total                                                                                           |  | 607.0                                                |  | 214.7                    |  | 392.3                             |  |                                  |  |                   

---

|(1) | Note that debt payments could be accelerated upon violation of debt covenants.
|--- | ------------------------------------------------------------------------------

|(2) | The ruble denominated bonds are due on May 16, 2006, and bondholders have a put option exercisable between May 9 and May 18, 2004 at 100.0% of the nominal value plus accrued
interest. The exercise of this put option may depend on the decision by VimpelCom Finance, the issuer of the ruble denominated bonds, to adjust the interest rate for the third and future semi-annual interest payments to 9.9% which determination was
made on May 7, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Basis of Presentation of Financial
Results



We maintain our records and prepare our statutory
financial statements in accordance with Russian accounting principles and tax legislation and in accordance with U.S. GAAP. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. They differ from our financial
statements issued for statutory purposes in Russia. The principal differences relate to:



| |  | revenue recognition;
| | - | --------------------



| |  | recognition of interest expense and other operating expenses;
| | - | -------------------------------------------------------------



| |  | valuation and depreciation of property and equipment;
| | - | -----------------------------------------------------



| |  | foreign currency translation;
| | - | -----------------------------



| |  | deferred income taxes;
| | - | ----------------------



| |  | capitalization and amortization of telephone line capacity;
| | - | -----------------------------------------------------------



| |  | valuation allowances for unrecoverable assets;
| | - | ----------------------------------------------



| |  | capital leases; and
| | - | -------------------



| |  | consolidation and accounting for subsidiaries.
| | - | ----------------------------------------------



The consolidated financial statements set forth in this Annual Report on Form 20-F include the accounts of our company and our consolidated subsidiaries.
Our consolidated financial statements also include the accounts of VimpelCom (BVI) Ltd., a special-purpose entity affiliated with and controlled by our company, and VC Limited, a wholly-owned subsidiary of VimpelCom (BVI) Ltd. All inter-company
accounts and transactions have been



103



---

##### Table of Contents

eliminated. We have used the equity method of accounting for companies in which our company has significant influence. Generally, this represents voting
stock ownership of at least 20.0% and not more than 50.0%.



We
pay taxes computed on income reported for Russian tax purposes. We base this computation on Russian tax rules, which differ substantially from U.S. GAAP. Certain items that are capitalized under U.S. GAAP are recognized under Russian accounting
principles as an expense in the year paid. In contrast, numerous expenses reported in the financial statements prepared under U.S. GAAP are not tax deductible under Russian legislation. As a consequence, our effective tax charge is different under
Russian tax rules and under U.S. GAAP.



Certain Factors Affecting our
Financial Position and Results of Operations



Inflation



The Russian government has battled inflation for the last decade and had
made significant progress by the mid-1990s. We set prices for our products and services in U.S. dollar equivalent units in order to help insulate us from the volatility of the Russian ruble. However, inflation affects the purchasing power of our
mass market subscribers. For the years ended December 31, 2003, 2002 and 2001, Russias annual inflation rates were 12.0%, 15.1% and 18.6%, respectively, according to Goskomstat.



Foreign Currency Translation



We report to Russian tax authorities and maintain our statutory accounting records in Russian rubles. The consolidated financial statements have been
prepared in accordance with U.S. GAAP and are stated in U.S. dollars, which is our functional currency. Accordingly, transactions and balances not already measured in U.S. dollars have been translated into U.S. dollars in accordance with the
relevant provisions of Statement of Financial Accounting Standards, or SFAS, No. 52, Foreign Currency Translation. Under SFAS No. 52, revenues, costs, capital and non-monetary assets and liabilities are translated at historical exchange
rates prevailing on the transaction dates. Monetary assets and liabilities are translated at exchange rates prevailing on the balance sheet date. Exchange gains and losses arising from the translation of monetary assets and liabilities that are not
denominated in U.S. dollars are credited or charged to operations.



On November 25, 2002, the AICPA International Practices Task Force concluded that effective January 1, 2003, Russia would no longer be considered highly inflationary. Consequently, we reassessed our functional currency as of January 1,
2003. The U.S. dollar remained the functional currency of our company and our subsidiaries, except for Cellular Company, Orensot and StavTeleSot. Effective January 1, 2003, the Russian ruble became the functional currency of each of these entities
as the majority of each of their revenues, costs and indebtedness and trade liabilities and the property and equipment purchased by each of these entities are either priced, incurred or payable or otherwise measured in Russian rubles. Assets and
liabilities of these entities are translated into U.S. dollars at exchange rates prevailing on the balance sheet date. Revenues, expenses, gains and losses are translated into U.S. dollars at historical exchange rates prevailing on the transaction
dates. Translation adjustments resulting from the process of translating the financial statements of these entities into U.S. dollars are reported in other comprehensive income, a separate component of shareholders equity.



The Russian ruble is not a fully convertible currency outside the territory
of the Russian Federation. Within the Russian Federation, official exchange rates are determined daily by the Central Bank of Russia. Market rates may differ from the official rates but the differences are, generally, within narrow parameters
monitored by the Central Bank of Russia.



On December 31, 2003,
2002 and 2001, the official Russian ruble-U.S. dollar exchange rate was 29.45 rubles per U.S. dollar, 31.78 rubles per U.S. dollar and 30.14 rubles per U.S. dollar, respectively. On December 31, 2003, 2002 and 2001, the official U.S. dollar-Euro
exchange rate was US$1.25 per Euro, US$1.04 per Euro and US$0.88 per Euro, respectively.



104



---

##### Table of Contents

We have implemented a number of risk management activities to minimize currency risk and exposure. To
minimize the risk of Russian ruble fluctuations and devaluation, we list tariffs and calculate monthly bills in U.S. dollar equivalent units, although we continue to receive payment in Russian rubles, in accordance with applicable law. As a result,
subscribers now pay their bills at the prevailing U.S. dollar-Russian ruble exchange rate on the date that payment is made. Subscribers are also charged a 1.0% surcharge to cover the cost of converting Russian rubles into U.S. dollars. In addition,
we hedge our Euro-denominated liabilities with U.S. dollar-Euro currency forward agreements and by maintaining some cash deposits in Euros.



To the extent permitted by Russian law we keep our readily available cash in U.S. dollars and Euros in order to manage against the risk of Russian ruble
devaluation. Our foreign currency liabilities are primarily associated with the purchase of network equipment, loans denominated in foreign currencies and roaming obligations to our international roaming partners. Under applicable law, we are
permitted to buy hard currency to settle these contracts. A large proportion of our Euro-denominated liabilities is hedged by a series of Euro-U.S. dollar forward currency exchange contracts, and we have cash and cash equivalents denominated in
Euros in an amount sufficient to cover the remaining liabilities, details of which are described above. Where possible, we incur indebtedness denominated in U.S. dollars in order to avoid currency exposure.



Critical Accounting Policies



The preparation of consolidated financial statements in conformity with U.S.
GAAP requires estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual amounts may differ from these estimates. The following critical
accounting policies require significant judgments, assumptions and estimates and should be read in conjunction with our consolidated financial statements included elsewhere in this Annual Report on Form 20-F.



Revenue Recognition



We earn service revenues for usage of our cellular system, which include airtime charges from contract and prepaid
subscribers, monthly contract fees, roaming charges and charges for value added services. Roaming revenues include revenues from our customers who roam outside their selected home coverage area and revenues from other wireless carriers for roaming
by their customers on our network. Value added services include SMS, caller number identification, voice mail, call waiting and data transmission. Generally, these features generate additional revenues through monthly subscription fees or increased
wireless usage through utilization of the features. Service revenue is generally recognized when the services (including value added services and roaming revenue) are rendered. Revenue on prepaid cards is deferred and recognized when services are
rendered. Revenues from equipment sales are recognized in the period in which the equipment is sold. Revenues are stated net of value-added tax charged to customers.



We determined that the sale of wireless services through our direct sales channel with an accompanying handset constitutes a
revenue arrangement with multiple deliverables. Upon adoption of EITF No. 00-21, our company allocates the arrangement consideration to the separate units of accounting, including the wireless service and handset, based on their relative fair
values.



Our billing cycles cut-off times require us to
estimate the amount of service revenue earned but not yet billed at the end of each accounting period. We estimate our unbilled service revenue by reviewing the amounts subsequently billed and estimating the amounts relating to the previous
accounting period based on the number of days covered by invoices and other relevant factors. Actual service revenues could be greater or lower than the amounts estimated due to the different usage of airtime in different days. We have analyzed the
potential differences and believe that historically they have not been material



In line with the SEC Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements, we defer telecommunications connection fees. Deferred revenues are subsequently recognized over the
estimated



105



---

##### Table of Contents

average customer lives under tariff plans, which provide for payment of connection fees and which are periodically reassessed by us, and such reassessment
may impact our future operating results.



Property and Equipment



We state our property and equipment at historical cost.
We depreciate our telecommunications equipment, including equipment acquired under capital leases, using the straight-line method over its estimated useful life of nine and one-half years. We depreciate buildings and leasehold improvements using the
straight-line method over estimated useful lives of 20 years. Office and measuring equipment, vehicles and furniture are depreciated using the straight-line method over estimated useful lives ranging from five to 10 years. The actual economic lives
may be different than our estimated useful lives, thereby resulting in different carrying value of our property and equipment. Changes in technology or changes in our intended use of property and equipment may cause the estimated useful lives or the
value of these assets to change. We perform periodic internal studies to confirm the appropriateness of the estimated useful economic lives of our property and equipment. These studies could result in a change in the depreciable lives of our
property and equipment and, therefore, our depreciation expense in future periods. In January 2004, the company changed the estimated useful life of GSM telecommunications equipment from 9.5 to seven years, due to the companys continuing
evaluation of its use of various technologies combined with the January 2004 announcements of the plans of the Russian Government to initiate the process of awarding licenses for new mobile communications technologies.



Intangible Assets



We capitalize payments made to third party suppliers to acquire access to and for use of telephone lines. We account for
these payments as intangible assets and they are amortized on a straight-line basis over 10 years. Telecommunication licenses are amortized on a straight-line basis until the expiration date of the licenses. Goodwill represents the excess of
consideration paid over the fair value of net assets acquired in purchase business combinations. Before January 1, 2002, goodwill was amortized using the straight-line method over the estimated remaining useful life. With the adoption of SFAS No.
142, Goodwill and Other Intangible Assets, as of January 1, 2002, no amortization was taken on these assets during 2002 and 2003. Our other intangible assets, principally our non-telecommunications licenses, are amortized on a
straight-line basis over their estimated useful lives, generally four to 10 years.



The actual economic lives of intangible assets may be different than our estimated useful lives, thereby resulting in a different carrying value of our intangible assets with finite lives. In accordance with SFAS No.
142, Goodwill and Other Intangible Assets, we continue to evaluate the amortization period for intangible assets with finite lives to determine whether events or circumstances warrant revised amortization periods. These evaluations could
result in a change in the amortizable lives of our intangible assets with finite lives and, therefore, our amortization expense in future periods. Historically we have had no material changes in estimated useful lives of our intangible assets.



In accordance with SFAS No. 142, we test goodwill for
impairment on an annual basis. Additionally, goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an entity below its carrying value. These events
or circumstances would include a significant change in the business climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of our business or other factors. Impairment tests require
estimates in respect of the identification of reporting units and their fair value. The determination of whether there are impairment indicators requires judgment on our behalf. We use estimated discounted future cash flows to determine the fair
value of reporting units. The use of different estimates or assumptions within our discounted cash flow models when determining the fair value of reporting units may result in different value for our goodwill, and any related impairment charge.



106



---

##### Table of Contents

Long-Lived Assets



We account for impairment of long-lived assets, except for goodwill, in accordance with the provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Impairment tests require estimates in respect of the grouping of long-lived assets. We test long-lived assets for
impairment when there are indicators of impairment, such as: significant decrease in the market prices of long-lived assets, significant adverse change in the extent or manner in which long-lived assets are being used or in their physical condition,
significant adverse change in legal factors or in the business climate that could affect the value of a long-lived assets, including an adverse action or assessment by a regulator, etc. The determination of whether there are impairment indicators
requires judgment on our behalf. The use of different assumptions in our estimated future cash flows when determining whether the assets are impaired may result in additional impairment charge.



Allowance for Doubtful Accounts



The allowance estimation process requires management to make assumptions
based on historical results, future expectations, the economic and competitive environment, and other relevant factors. Allowances for doubtful accounts receivable are maintained based on historical payment patterns, aging of accounts receivable and
actual collection history. We maintain allowances for doubtful accounts for estimated losses from our subscribers inability to make payments that they owe us. In order to estimate the appropriate level of this allowance, we analyze historical
bad debts, current economic trends and changes in our customer payment patterns. If the financial condition of our subscribers were to deteriorate and to impair their ability to make payments to us, additional allowances might be required in future
periods. Changes to allowances may be required if the financial condition of our customers improves or deteriorates or if we adjust our credit standards for new customers, thereby resulting in collection patterns that differ from historical
experience.



Valuation Allowance for Deferred Tax Assets



We record valuation allowances related to tax effects of deductible
temporary differences and loss carry forwards when it is more likely than not that some or all of the deferred tax assets will not be realized in the future. These evaluations are based on expectations of future taxable income and reversals of the
various taxable temporary differences. As of December 31, 2003, our deferred tax asset amounted to US$21.4 million, and no valuation allowance was recognized. Changes in our assessment of probability of realization of deferred tax assets may impact
our effective income tax rate.



Business Combinations



We allocate purchase prices paid for the acquired businesses based on the
fair value of acquired assets, including intangible assets, and assumed liabilities. The determination of the fair value of assets and liabilities is based on various factors, including our estimates of the future discounted cash flows. The use of
different estimates or assumptions within our discounted cash flow models when determining the fair value of assets and liabilities of the acquired entities may result in different values for these assets and liabilities, goodwill and future
depreciation and amortization expense.



107



---

##### Table of Contents

Recent Accounting Pronouncements



Accounting for Assets Retirement Obligations



In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement deals
with the costs of closing facilities and removing assets. SFAS No. 143 requires entities to record the fair value of a legal liability for an asset retirement obligation in the period it is incurred. This cost is initially capitalized and amortized
over the remaining life of the asset. Once the obligation is ultimately settled, any difference between the final cost and the recorded liability is recognized as a gain or loss on disposition. SFAS No. 143 is effective for years beginning after
June 15, 2002. For year ended December 31, 2003, total net of tax effect of the application on P&L amounted to US$884,712, where US$379,209 is net cumulative effect for period before January 1, 2003, and US$505,503 less income tax benefit
US$121,321 relates to year 2003 expenses. Balance sheet obligation for assets retirement as of December 31, 2003 equals US$3,942,183. Deferred tax asset in amount of US$241,071 was added to the consolidated balance sheet as a result of this
application. The balancing amount of US$2,816,400 represents net book value of long-lived asset recorded under FAS 143 provisions. Minority interest (equity) amounts to negative US$178,439 as of December 31, 2003.



Accounting for Costs Associated with Exit or Disposal Activities



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This statement nullifies Emerging Issues Task Force No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring) which required that a liability for an exit cost be recognized upon the
entitys commitment to an exit plan. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of the provisions of SFAS No. 146 did not have a material impact on our results of
operations, financial position or cash flow.



Accounting for Stock-Based
Compensation



In December 2002, the FASB issued SFAS No.
148 Accounting for Stock-Based CompensationTransition and Disclosurean amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123 Accounting for Stock-Based Compensation to provide alternative methods
of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS No. 123 to require prominent disclosure about the effects on
reported net income of an entitys accounting policy decisions with respect to stock-based employee compensation. SFAS No. 148 also amends APB Opinion No. 28 Interim Financial Reporting to require disclosure about those effects in
interim financial information. The amendments to SFAS No. 123 introduced in SFAS No. 148 are effective for financial statements for fiscal years ending after December 15, 2002. We adopted the disclosure requirements of SFAS No. 148 in the
consolidated financial statements for the year ended December 31, 2003.



Accounting for Guarantees



In November 2002,
the FASB issued FASB Interpretation, or FIN, No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires that upon issuance of a guarantee,
the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. The disclosure provisions of FIN No. 45 are effective for financial statements of annual periods that end after December 15, 2002. The
provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002. The adoption of the provisions of FIN No. 45 did not have a material impact on our results of
operations, financial position or cash flow.



108



---

##### Table of Contents

Consolidation of Variable Interest Entities



In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities. FIN No. 46 amended
Accounting Research Bulletin No. 51, Consolidated Financial Statements, and established standards for determining under what circumstances a variable interest, or VIE, should be consolidated with its primary beneficiary. FIN No. 46 also
requires disclosure about VIEs that are not required to be consolidated but in which the reporting entity has a significant variable interest. In December 2003, the FASB revised certain implementation provisions of FIN No. 46. The revised
interpretation, FIN No. 46R, substantially retained the requirements of immediate application of FIN No. 46 to VIEs created after January 31, 2003. There were no such entities created after January 31, 2003. With respect to older VIEs, the
consolidation requirements under FIN No. 46R apply not later than for the first financial year or interim period ending after December 15, 2003, if such a VIE is a special-purpose entity, or SPE, and no later than for the first financial year or
interim period ending after March 15, 2004, if such a VIE is not an SPE. We completed an evaluation of this guidance and concluded that the adoption of the provisions of FIN No. 46 did not have a material impact on our consolidated financial
statements and is not expected to have a material impact on our consolidated financial statements when it is fully implemented in 2004.



Amendment to SFAS 133 on Derivative Instruments and Hedging Activities



In April 2003, the FASB issued SFAS No. 149, Amendment to Statement 133 on Derivative Instruments and Hedging Activities. This statement
amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133 Accounting for Derivative
Instruments and Hedging Activities. It is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. All provisions of SFAS No. 149 should be applied prospectively, except
as stated further. Provisions related to SFAS No. 133 implementation issues that have been effective for fiscal quarters beginning prior to June 15, 2003, should continue to be applied in accordance with their respective dates. Rules related to
forward purchases or sales of when-issued securities or other similar securities should be also applied to existing contracts. The adoption of the provisions of SFAS No. 149 did not have a material impact on our results of operations, financial
position or cash flow.



Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity



In May
2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of the provisions of SFAS No. 150 did not have a material impact on our
results of operations, financial position or cash flow.



Related Party
Transactions



We have entered into transactions with
related parties and affiliates. Please see the section of this Annual Report on Form 20-F entitled Item 7Major Shareholders and Related Party TransactionsB. Related Party Transactions.



Reclassifications



Certain reclassifications have been made to the prior years consolidated financial statements to conform to the
current year presentation. Input VAT was presented separately from other current assets. Taxes payable and amounts due to employees were presented separately from accrued liabilities. Customer deposits and customer advances were presented separately
from each other.



109



---

##### Table of Contents

Additional Reconciliations of Non-U.S. GAAP Financial Measures (Unaudited)



ARPU and SAC are non-U.S. GAAP financial measures. ARPU is used to measure
the average monthly services revenue on a per subscriber basis. ARPU is calculated as service revenue generated by subscribers, including roaming revenue, but excluding revenue from connection fees and revenue from rent of fiber-optic channels,
divided by the average number of our subscribers for the period. SAC is used to measure the average cost of adding a new subscriber, SAC is calculated as our sales and marketing expenses which include advertising and marketing expenses and
dealers commission expense (included within selling, general and administrative expenses on our Statements of Income) and handsets and accessories subsidies, if any, (included within Cost of handsets and accessories sold on our Statements of
Income) divided by the number of new gross subscribers added in the period.



We believe that ARPU and SAC provide useful information to investors because they are indicators of the performance of our business operations and assist management in budgeting. We believe ARPU provides management
with useful information concerning usage and acceptance of our services. We believe that SAC assists management in quantifying the incremental costs to acquire a new subscriber. Non-U.S. GAAP financial measures should not be viewed in isolation or
as an alternative to other figures reported under U.S. GAAP. Reconciliation of ARPU to service revenue and connection fees and SAC to selling, general and administrative expenses, the most directly comparable U.S. GAAP financial measures, is
presented below.



Reconciliation of ARPU to Service Revenue
and Connection Fees



(Unaudited, in thousands of U.S.
dollars, except for ARPU amounts)



|                                                                         |  |                          |           |      |     |         |  |      |         |      |     |         |  |     |        
|------------------------------------------------------------------------ |  | ------------------------ | --------- | ---- | --- | ------- |  | ---- | ------- | ---- | --- | ------- |  | --- | -------
|                                                                         |  | Years Ended December 31,
|                                                                         |  | 2003                     |           | 2002 |     | 2001    |  | 2000 |         | 1999
|Total ARPU:                                                              |  |                          |           |      |     |         |  |      |         |      |     |         |  |     |        
|Service revenue and connection fees                                      |  | US$                      | 1,266,662 |      | US$ | 727,868 |  | US$  | 383,321 |      | US$ | 252,333 |  | US$ | 206,542
|Less: Connection fees                                                    |  |                          | 1,282     |      |     | 1,962   |  |      | 2,079   |      |     | 711     |  |     | 887    
|Less: Revenue from rent of fiber-optic channels                          |  |                          | 1,299     |      |     | 1,831   |  |      | 2,032   |      |     | 813     |  |     | 2,135  
|Service revenue used to calculate ARPU                                   |  |                          | 1,264,081 |      |     | 724,075 |  |      | 379,210 |      |     | 250,809 |  |     | 203,520
|Average number of subscribers                                            |  |                          | 7,749     |      |     | 3,305   |  |      | 1,208   |      |     | 562     |  |     | 172    
|Average revenue per subscriber per month                                 |  | US$                      | 13.6      |      | US$ | 18.3    |  | US$  | 26.2    |      | US$ | 37.2    |  | US$ | 98.6   
|Moscow license area ARPU:                                                |  |                          |           |      |     |         |  |      |         |      |     |         |  |     |        
|Total operating revenues                                                 |  | US$                      | 977,199   |      | US$ | 718,429 |  | US$  | 420,387 |      |     | N/A     |  |     | N/A    
|Less: Revenues from sales of handsets and accessories and other revenues |  |                          | 87,883    |      |     | 53,417  |  |      | 45,420  |      |     | N/A     |  |     | N/A    
|Less: Connection fees                                                    |  |                          | 777       |      |     | 1,727   |  |      | 1,904   |      |     | N/A     |  |     | N/A    
|Less: Revenue from rent of fiber-optic channels                          |  |                          | 1,299     |      |     | 1,831   |  |      | 2,032   |      |     | N/A     |  |     | N/A    
|Service revenue used to calculate ARPU                                   |  |                          | 887,240   |      |     | 661,454 |  |      | 371,031 |      |     | N/A     |  |     | N/A    
|Average number of subscribers                                            |  |                          | 4,522     |      |     | 2,835   |  |      | 1,168   |      |     | N/A     |  |     | N/A    
|Moscow license area average revenue per subscriber per month             |  | US$                      | 16.4      |      | US$ | 19.4    |  | US$  | 26.5    |      |     | N/A     |  |     | N/A    
|Regional ARPU:                                                           |  |                          |           |      |     |         |  |      |         |      |     |         |  |     |        
|Total operating revenues                                                 |  | US$                      | 459,355   |      | US$ | 88,013  |  | US$  | 11,973  |      |     | N/A     |  |     | N/A    
|Less: Revenues from sales of handsets and accessories                    |  |                          | 35,335    |      |     | 17,219  |  |      | 2,423   |      |     | N/A     |  |     | N/A    
|Less: Other revenues                                                     |  |                          | 7,102     |      |     | 647     |  |      | 68      |      |     | N/A     |  |     | N/A    
|Less: Connection fees                                                    |  |                          | 522       |      |     | 298     |  |      | 284     |      |     | N/A     |  |     | N/A    
|Service revenue used to calculate ARPU                                   |  |                          | 416,396   |      |     | 69,849  |  |      | 9,198   |      |     | N/A     |  |     | N/A    
|Average number of subscribers                                            |  |                          | 3,227     |      |     | 469     |  |      | 35      |      |     | N/A     |  |     | N/A    
|Regional average revenue per subscriber per month                        |  | US$                      | 10.8      |      | US$ | 12.4    |  | US$  | 21.9    |      |     | N/A     |  |     | N/A    



110



---

##### Table of Contents

Reconciliation of SAC to Selling, General and Administrative Expenses



(Unaudited, in thousands of U.S. dollars, except for SAC amounts)



|                                                |  |                          |         |      |     |         |  |     |        
|----------------------------------------------- |  | ------------------------ | ------- | ---- | --- | ------- |  | --- | -------
|                                                |  | Years Ended December 31,
|                                                |  | 2003                     |         | 2002 |     | 2001   
|Total:                                          |  |                          |         |      |     |         |  |     |        
|Selling, general and administrative expenses    |  | US$                      | 467,655 |      | US$ | 271,963 |  | US$ | 149,052
|Less: General and administrative expenses       |  |                          | 290,870 |      |     | 171,991 |  |     | 91,230 
|Sales and marketing expenses, including         |  | US$                      | 176,785 |      | US$ | 99,972  |  | US$ | 57,822 
|advertising & marketing expenses                |  |                          | 50,867  |      |     | 28,887  |  |     | 19,885 
|dealers commission expense                     |  |                          | 125,918 |      |     | 71,085  |  |     | 37,937 
|New gross subscribers                           |  |                          | 9,144   |      |     | 3,896   |  |     | 1,536  
|Total Subscriber Acquisition Cost               |  | US$                      | 19.3    |      | US$ | 25.7    |  | US$ | 37.6   
|Moscow license area SAC:                        |  |                          |         |      |     |         |  |     |        
|Selling, general and administrative expenses    |  | US$                      | 308,745 |      | US$ | 225,111 |  | US$ | 138,510
|Less: General and administrative expenses       |  |                          | 193,256 |      |     | 138,218 |  |     | 82,082 
|Sales and marketing expenses, including         |  | US$                      | 115,489 |      | US$ | 86,893  |  | US$ | 56,428 
|advertising & marketing expenses                |  |                          | 31,031  |      |     | 21,930  |  |     | 19,132 
|dealers commission expense                     |  |                          | 84,458  |      |     | 64,963  |  |     | 37,296 
|New gross subscribers                           |  |                          | 4,055   |      |     | 2,762   |  |     | 1,447  
|Moscow license area Subscriber Acquisition Cost |  | US$                      | 28.5    |      | US$ | 31.5    |  | US$ | 39.0   
|Regional SAC:                                   |  |                          |         |      |     |         |  |     |        
|Revenues from sales of handsets and accessories |  | US$                      | 35,335  |      | US$ | 17,219  |  | US$ | 2,423  
|Less: Cost of handsets and accessories sold     |  |                          | 33,098  |      |     | 18,530  |  |     | 2,558  
|Handsets and accessories subsidies              |  | US$                      |        |      | US$ | 1,311   |  | US$ | 135    
|Selling, general and administrative expenses    |  | US$                      | 170,153 |      | US$ | 49,551  |  | US$ | 11,895 
|Less: General and administrative expenses       |  |                          | 108,503 |      |     | 35,873  |  |     | 10,688 
|Sales and marketing expenses, including         |  | US$                      | 61,650  |      | US$ | 13,678  |  | US$ | 1,207  
|advertising & marketing expenses                |  |                          | 19,835  |      |     | 7,189   |  |     | 763    
|dealers commission expense                     |  |                          | 41,815  |      |     | 6,489   |  |     | 444    
|Handsets and accessories subsidies              |  | US$                      |        |      | US$ | 1,311   |  | US$ | 135    
|Sales and marketing expenses                    |  |                          | 61,650  |      |     | 13,678  |  |     | 1,207  
|Customer acquisition costs                      |  | US$                      | 61,650  |      | US$ | 14,989  |  | US$ | 1,342  
|New gross subscribers                           |  |                          | 5,089   |      |     | 1,134   |  |     | 89     
|Regional Subscriber Acquisition Cost            |  | US$                      | 12.1    |      | US$ | 13.2    |  | US$ | 15.1   



111



---

##### Table of Contents

|ITEM 6. | Directors, Senior Management and Employees
|------- | ------------------------------------------



A.    Directors and Senior Management



As of April 30, 2004, the members of our board of directors, management advisory committee, audit commission and other members of our senior management
were as follows:



|                            |  |     |  |                                                             
|--------------------------- |  | --- |  | ------------------------------------------------------------
|Name                        |  | Age |  | Title                                                       
|Jo O. Lunder(1)             |  | 42  |  | Chairman of Board of Directors                              
|                            |  |    
|Mikhail M. Fridman(2)       |  | 40  |  | Director                                                    
|                            |  |    
|Arve Johansen(1)            |  | 54  |  | Director                                                    
|                            |  |    
|Pavel V. Kulikov(2)         |  | 27  |  | Director                                                    
|                            |  |    
|Alexey M. Reznikovich(2)    |  | 36  |  | Director                                                    
|                            |  |    
|Alex Sozonoff(3)            |  | 65  |  | Director                                                    
|                            |  |    
|Terje Thon(1)               |  | 58  |  | Director                                                    
|                            |  |    
|Henrik E. Torgersen(1)      |  | 57  |  | Director                                                    
|                            |  |    
|Natalia S. Tsukanova(2)     |  | 37  |  | Director                                                    
|                            |  |    
|Alexander V. Izosimov(4)    |  | 40  |  | Chief Executive Officer and General Director                
|                            |  |    
|Elena A. Shmatova(4)        |  | 45  |  | Chief Financial Officer                                     
|                            |  |    
|Nikolai N. Pryanishnikov(4) |  | 31  |  | First Vice President and Commercial Director                
|                            |  |    
|Jere C. Calmes(4)           |  | 34  |  | Vice President of Customer Operations and Product Management
|                            |  |    
|Sergei M. Avdeev(4)         |  | 54  |  | Vice President of Network Development                       
|                            |  |    
|Alexei M. Mischenko(4)      |  | 55  |  | First Vice President of Regional and Business Development   
|                            |  |    
|Marina V. Novikova(4)       |  | 39  |  | Director of Human Resources                                 
|                            |  |    
|Olga N. Turischeva(4)       |  | 34  |  | Director of Marketing                                       
|                            |  |    
|Valery V. Frontov           |  | 53  |  | Vice President of Licensing                                 
|                            |  |    
|Valery P. Goldin            |  | 62  |  | Vice President of International Relations                   
|                            |  |    
|Igor V. Orlov               |  | 31  |  | Chief Compliance Officer                                    
|                            |  |    
|Georgy Silvestrov           |  | 39  |  | Secretary of Board of Directors                             
|                            |  |    
|Alexander Gersh             |  | 40  |  | Audit Commission Member                                     
|                            |  |    
|Knut Giske(1)               |  | 37  |  | Audit Commission Member                                     
|                            |  |    
|Nigel J. Robinson(2)        |  | 36  |  | Audit Commission Member                                     

---

|(1) | Telenor nominee.
|--- | ----------------

|(2) | Alfa Group nominee.
|--- | -------------------

|(3) | Nominated by Telenor and approved by Alfa Group.
|--- | ------------------------------------------------

|(4) | Member of the management advisory committee.
|--- | --------------------------------------------



Under the terms of a shareholders agreement dated as of May 30, 2001 between Telenor and Alfa Group, Telenor and Alfa Group have the right to nominate up
to four candidates each for election to our board of directors, for so long as each company beneficially owns at least 25.0% plus one share of our companys issued and outstanding capital stock. One of the four candidates nominated by each,
however, may not be an employee, officer or director of Telenor, Alfa Group or any of their affiliates, unless Telenor or Alfa Group, as the case may be, beneficially owns more than 44.0%, but not more than 50.0%, of our issued and outstanding
capital stock. In addition, for so long as Telenor beneficially owns at least 25.0% plus one share of our companys issued and outstanding capital stock, it is entitled to nominate one additional director to our board of directors (subject to
Alfa Groups approval if, at that time, Alfa Group beneficially owns at least 25.0% plus one share of our companys issued and outstanding capital stock). Such additional director may not be an employee, officer, director and/or other
affiliate of Telenor, Alfa Group or any of their affiliates. Alfa Group recently reported that it owned 25.0% plus two shares of our voting capital stock and Telenor recently reported that it owned 25.0% plus 13 shares of our voting capital stock.



112



---

##### Table of Contents

Current Directors, Senior Management and Audit Commission Members



Jo O. Lunderserved as Chairman of the board of directors of
our company since October 2003. From April 2001 until October 2003, Mr. Lunder served as Chief Executive Officer of our company, and from May 2001 until October 2003 as our General Director. Mr. Lunder has served as a director of our company since
May 2002. From September 2000 until April 2001, Mr. Lunder served as our companys President and Chief Operating Officer. From May 2000 until September 2000, Mr. Lunder served as First Deputy Chief Executive Officer and Chief Operating Officer
of our company. From September 1999 until April 2000, Mr. Lunder served as our Chief Operating Officer. From 1993 to August 1999, Mr. Lunder served in various capacities for Telenor and its affiliates, including Chief Operating Officer of Telenor
Mobile AS. Mr. Lunder earned a bachelors degree from Oslo Business School and an MBA from Henley Management College in the U.K. He has also completed a Management Training program at IMD in Lausanne, Switzerland.



Mikhail M. Fridmanhas been a director of our company since
July 2001. Mr. Fridman currently serves as Chairman of the board of directors of Alfa Bank and as a member of the boards of directors of Alfa Finance Holdings and OJSC TNK. Mr. Fridman is also a Chairman of the Supervisory Board of the
Consortium Alfa Group. Since 1989, Mr. Fridman has taken an active part in the formation of Alfa Group, which includes Alfa Finance Holdings S.A. (Alfa Bank, Alfa Capital Holdings Limited and Medpoint Limited), Alfa-Eco Holdings Limited and ZAO
Trade House Perekriostok. In 1988, Mr. Fridman co-founded Alfa-Foto cooperative. From 1986 until 1988, Mr. Fridman served as an engineer at Elektrostal metallurgical works. Mr. Fridman graduated with honors from the Faculty
of Non-Ferrous Metals of the Moscow Institute of Steel and Alloys.



Arve Johansenhas been a director of our company since June 2003. Mr. Johansen currently serves as Chief Executive Officer of Telenor Mobile and Senior Executive Vice President of Telenor, a position that he has held since
2000. Mr. Johansen is also a member of the boards of directors of Telenor Mobil (Norway), DTAC/UCOM (Thailand), DiGi.Com (Malaysia) and several other companies. Mr. Johansen held various positions before joining the Telenor Group in 1989, including
Chief Executive Officer and a member of the corporate board of Telia-Telenor Mobile in 1999, Chief Executive Officer of Telenor International AS from 1995 to 1998, Vice President of Norsk Telekom AS from 1993 to 1994 and Vice President of TBK AS
(Telenor Business Communications) from 1989 to 1992. From 1985 until 1988, Mr. Johansen served as Vice President of Ericsson (Norway), responsible for the sale and delivery of large specialized telecommunications systems to customers worldwide. Mr.
Johansen received a M.S. degree in telecommunications from the Norwegian Institute of Technology and completed the Program for Management Development at Harvard Business School.



Pavel V. Kulikovhas been a director of our company since May 2002. He has served as the General Director of
Alfa-Eco Telecom since 2000. Mr. Kulikov is also a member of the board of directors of our wholly-owned subsidiary, KB Impuls. From 1998 until 2000, Mr. Kulikov served as Deputy General Director of JSC Moscow Black Iron Casting Factory. From 1997
until 1998, Mr. Kulikov served as Deputy General Director of ZAO MSS-Start, which is now a wholly-owned subsidiary of our company and a retail dealer for mobile telecommunications companies in the Moscow license area. Mr. Kulikov
graduated from Moscow State University and is currently doing postgraduate research at the Moscow State University



Alexey M. Reznikovichhas served as a director of our company since May 2002. Since December 2002, he has served as director of Asset
Management Control of Alfa Group. Mr. Reznikovich was the General Director and a member of the boards of directors of CafeMax and EMAX from February 2001 until December 2002. From January 1996 to February 2001, Mr.
Reznikovich was a partner at McKinsey & Co. Before joining McKinsey & Co., Mr. Reznikovich worked at Procter & Gamble (Italy) and Transworld (USA). Mr. Reznikovich graduated from the Economics Faculty of Moscow State University and
received an MBA from Georgetown University/INSEAD University in France.



Alex Sozonoffhas served as a director of our company since June 2003. Mr. Sozonoff currently serves as Chairman of the boards of directors of Stonesoft OY (Helsinki), European Wholesale Group, Ltd. (Switzerland),



113



---

##### Table of Contents

Hewlett-Packard OY (Finland) and Global Beach Group. Mr. Sozonoff is also a board member of F-Secure Corp. and the Co-Chairman of the Sir Peter Ustinov
Foundation in Geneva, Switzerland. Mr. Sozonoff held various positions at Hewlett-Packard for 35 years, retiring in January 2001. He continues to serve as the Senior Advisor to the Chief Executive Officer of Hewlett-Packard. Immediately prior to his
retirement, Mr. Sozonoff served as Vice President of Customer Advocacy, responsible for raising Hewlett-Packards overall skill in the area of relationship management. In addition, he was responsible for the Total Customer Experience for the
Business Customer Organization. In 1997, he was named Executive of the Year by the North American Account Management Association. Mr. Sozonoff received a bachelors degree in economics from the University of Tennessee and a degree
from the Nijenrode University in Breukelen, Netherlands. He graduated from the Wharton Management Program in 1995.



Terje Thonhas been a director of our company since January 1999. Mr. Thon currently serves as the Chairman of the boards of directors of
the Norwegian newspaper Dagbladet AS, Norwegian Air Ambulance and Bravida ASA. Mr. Thon also serves as a member of the boards of directors of Storebrand Bank AS, Tandberg Data ASA, ProAct IT Group AB and Birdstep Technology ASA. From November 1994
until October 2000, Mr. Thon served as Senior Executive Vice President of Telenor AS, with responsibility for Telenors international activities. Previously, Mr. Thon served as Deputy Managing Director of Norsk Telekom and Managing Director of
TBK AS. Prior to joining Telenor, Mr. Thon held senior management positions in the former Norwegian telecommunications group EB AS, which subsequently merged into the ABB group, and the Norwegian companies ASV and NVE. Mr. Thon received a M.S.
degree from the Norwegian Technical University and completed the Program for Management Development at Harvard Business School.



Henrik Torgersenhas been a director of our company since January 1999. Mr. Torgersen currently serves as Executive Vice-President of
Telenor, a position that he has held since July 2000. He has also served as President of Telenor East Invest AS and Regional Director of Telenor responsible for operations in Russia and the CIS countries since November 1998. He joined Telenor as a
Senior Vice President in August 1998. Prior to joining Telenor, Mr. Torgersen was an Associate Partner at Andersen Consulting (now Accenture) in the area of electronic commerce. From 1992 to 1998, he worked with Andersen Consulting and was
responsible for building and running its Foundation Software Organisation in Northern Europe. Mr. Torgersen has more than 15 years of experience as an executive in the IT industry and worked for eight years with IBM. He holds a masters degree
in electrical engineering and cybernetics from the Technical University of Norway and has completed a Management Training program at IMD in Lausanne, Switzerland.



Natalia S. Tsukanovahas served as a director of our company since June 2003. Ms. Tsukanova has served as Vice
President of J.P. Morgan since 1997, with responsibility for mergers and acquisitions in the area of natural resources. Prior to joining J.P. Morgan, Ms. Tsukanova worked for the State Property Management Committee of the Russian Federation and for
Boston Consulting Group in London and Moscow. Ms. Tsukanova holds a Ph.D. and M.A. degree in economics from Moscow State University and Harvard and an MBA with honors from INSEAD University in France.



Alexander V. Izosimovhas served as CEO of our company since
October 2003. Mr. Izosimov held several senior positions at Mars, Inc. Building on his early background in finance and sales, Mr. Izosimov was general manager for Russia and the CIS until 2001. Most recently, Mr. Izosimov served as a member of the
Global Executive Management Board and Regional President for the CIS, Central Europe and Nordics for Mars, Inc., with responsibility for more than 20 markets in the region, including all of Russia and the CIS. Prior to joining Mars, Inc. in 1996,
Mr. Izosimov worked for McKinsey & Co. in Stockholm and London for five years, where he focused on sales and marketing issues as well as cost optimization. Mr. Izosimov graduated from the Moscow Aviation Institute with a M.S. degree in 1987 and
holds an MBA from INSEAD.



Elena Shmatovahas
served as Chief Financial Officer of our company since January 2003. Ms. Shmatova served as Director of Treasury of our company from March 2002 to December 2003 and as Financial Controller of our company from December 1999 to March 2002. Ms.
Shmatova is also a member of the boards of directors



114



---

##### Table of Contents

of KB Impuls and Extel and general director of VC Option LLC and VimpelCom Finance LLC, which are part of our consolidated group of companies. From 1992 to
1999, Ms. Shmatova served as Deputy Finance Director, Finance Director and Vice-President of Finance at the Sprint Communications/GlobalOne Group of companies in Russia. Prior to 1992, Ms. Shmatova served as a Financial Director of Express
Mail Service-Garantpost and was an economist at the Ministry of Telecommunications of the USSR and the Center of International Accounting of the Ministry of Telecommunications of the USSR. Ms. Shmatova received a bachelors degree in
economics from the Moscow Telecommunications University.



Nikolai N. Pryanishnikovhas served as First Vice President and Commercial Director of our company since October 2000. From May 1999 until October 2000, he held various positions at our company, including Deputy General
Director and Head of Moscow Operations. From April 1997 to May 1999, Dr. Pryanishnikov served as Deputy General Director for Commercial Business at Moscow Cellular Communications Company. From May 1992 to April 1997, Dr. Pryanishnikov
held various positions at Moscow Cellular Communications Company, including General Director of Mobile Centre (ZAO MSS Start), Marketing Director, Head of the Marketing Development Sector and sales representative.
Dr. Pryanishnikov graduated from the Moscow Automobile and Road Building Institute, the All-Russia Financial Institute and received an MBA degree from the Higher Commercial School at the Ministry of International Economic Relations and Trade of the
Russian Federation and International Management University (Paris). Dr. Pryanishnikov received a Ph.D. from the Higher School of Economics and Entrepreneurship at the Ministry of Foreign Relations and Commerce of the Russian Federation.



Jere C. Calmeshas served as Vice President of Customer
Operations and Product Management of our company since January 2001. Mr. Calmes is also a member of the boards of directors of Extel, StavTeleSot, Bee Line Samara and Orensot, all of which are part of our consolidated group of companies. From May
1996 until January 2001, Mr. Calmes held various positions within the Network Management Group of Motorola Inc.s international portfolio of wireless operating companies. These positions included Director of Customer Services and Credit Control
for ECMS-MobiNil, a leading GSM operator in Egypt, from July 1998 until January 2001, and Deputy General Director of St. Petersburg Telecom from May 1996 until July 1997. Mr. Calmes has worked in the wireless industry in a number of countries
including Russia, the United Kingdom, Lithuania, Jordan, Israel, Pakistan and Egypt. Mr. Calmes received a B.A. degree in International Relations from Bates College in 1992 and completed an Executive Development Program at Wharton School of Business
in the summer of 2002.



Sergei M. Avdeevhas
served as the Vice President of Network Development of our company since 1998. Mr. Avdeev served as Regional AMPS Project Manager from 1995 to 1996 and as GSM-1800 Project Manger from 1996 to 1998. Currently, Mr. Avdeev also serves as a member of
the board of directors of ZAO ICO-R, a satellite telecommunications company, and as General Director of KB Impuls. Mr. Avdeev received the equivalent of a Ph.D. in Radio Science from, and was a professor at, Moscows State Technical University
named after N.E. Bauman.



Alexei M. Mischenkohas
served as General Director of VimpelCom-Region since June 2001, General Director of Vostok-Zapad Telecom since May 2003 and First Vice President of Regional and Business Development of our company since May 2002. Mr. Mischenko is also a member of
the board of directors of KB Impuls. From November 1999 to June 2001, Mr. Mischenko served as General Director of FORA Communications. From January to November 1999, he served as Managing Director of ZAO Lucent Technologies in St. Petersburg and,
from December 1997 to November 1999, as Deputy Managing Director of ZAO Lucent Technologies Russia. Mr. Mischenko earned a degree in microelectronics from the Leningrad Electrotechnical Institute named after V.I. Ulyanov in 1993, and a Ph.D in fiber
optics components from All-Union Scientific Research Institute of General Techniques Standardization in Moscow in 1989.



Marina V. Novikovahas served as Director of Human Resources of our company since December 2001. From December 2000 to December 2001, she
served as Regional Human Resources Manager for Eastern Europe



115



---

##### Table of Contents

of AVAYA Communications. From July 1997 to November 2001, Ms. Novikova served as Human Resources Manager of ZAO Lucent Technologies. Ms. Novikova received a
degree in linguistics from Moscow Linguistics University.



Olga N. Turischevahas served as Director of Marketing of our company since January 2001. From 1998 to December 2000, she served as Marketing Director of Bosch und Siemens Hausgeraete in Moscow. Ms. Turischeva received a
degree in economics from Moscow State University.



Valery
V. Frontovhas served as Vice President of Licensing of our company since January 1998 and was a member of our board of directors from January 1999 until July 2001. From December 1994 to June 1998, Mr. Frontov served as head of the Radio
Frequency Service. In 1994, Mr. Frontov served as an employee in the office of the Moscow City Duma. From 1968 to 1993, Mr. Frontov served in the Russian military, reaching the rank of Colonel. Mr. Frontov received a Candidate of Science degree,
which is equivalent to a Ph.D., from the Radio Engineering Department of the Leningrad Military Engineering Academy. Mr. Frontov also received a masters degree in public management from the Academy of National Economy under the Government of
the Russian Federation. Mr. Frontov also received a law degree from the Russian Law Academy.



Valery P. Goldinhas served as Vice President of International Relations of our company since August 1996, and served as a member of our board of directors from September 1996 until July 2001. From
October 1992 to September 1996, Mr. Goldin served as Assistant to the President of our company, with responsibilities for external economic relations. From 1970 until joining our company in 1992, Mr. Goldin served in various capacities at the Mintz
Radio Technical Institute, including as research associate, senior engineer, senior research associate and chief of laboratory where he conducted research in radio physics and wave and particle propagation in different media, as well as computer
assisted processing of information. Mr. Goldin graduated from the Moscow Physics and Engineering Institute and received a Candidate of Science degree in physics and mathematics from the Kharkov Institute of Physics and Technology.



Igor V. Orlovhas served as Chief Compliance Officer of our
company since February 2004 and as head of our companys Corporate Governance Group since February 2003. From February 1999 until January 2003, Mr. Orlov served as Legal Advisor and Deputy Director of Corporate Affairs at Nestlé Food LLC
in Moscow. Mr. Orlov graduated from the Law Faculty of Moscow State University in 1995 and has obtained additional legal training from the Central European University and Brigham Young University, J. Reuben Clark Law School.



Georgy V. Silvestrovhas served as Secretary of the board of
directors of our company since January 1999. Mr. Silvestrov served as Chief Compliance Officer of our company from June 1999 until February 2003, and as General Counsel of our company from July 1998 to June 1999. Mr. Silvestrov served as the head of
the legal department of Sistema from November 1995 to June 1998. He received a Candidate of Law Sciences degree in international law from the Institute of State and Law of the USSR Academy of Sciences and graduated from the Law Faculty of Moscow
State University.



Alexander Gershhas been a
member of our audit commission since June 2003. Mr. Gersh is currently the Chief Financial Officer of FLAG Telecom, a leading provider of wholesale network transport and communications services. Previously, Mr. Gersh was the Chief Financial Officer
of NextiraOne LLC and Transora. From 1998 through 2001, Mr. Gersh was Chief Financial Officer of BT Cellnet, a subsidiary of British Telecommunications Plc, which is one of the largest cellular service providers in Europe and Chief Financial Officer
of BT Europe for British Telecommunications Plc. From 1994 through 1997, Mr. Gersh served as Finance Director for Europe, the Middle East and Africa and Chief Financial Officer of St. Petersburg Telecom, a subsidiary of Motorola, Inc. Mr. Gersh is a
member of the Institute of Certified Public Accountants. Mr. Gersh graduated with a B.A. from Baruch College (City University of New York).



Knut Giskehas been a member of our audit commission since June 2003. Mr. Giske currently serves as Vice President of Finance of Telenor
Mobile, a position that he has held since 2000. Prior to joining Telenor, Mr. Giske spent nine years with Arthur Andersen & Co, as an auditor, senior auditor and manager. Mr. Giske



116



---

##### Table of Contents

graduated with a B.A. degree from the Norwegian School of Management and an MBA in finance from Northern Illinois University. Mr. Giske became a State
Authorised Public Accountant in Norway in 1994.



Nigel J.
Robinsonhas been a member of our audit commission since July 2001. Mr. Robinson currently serves as the Director of Corporate Development Finance and Control of Alfa Group, a position that he has held since January 2000. Mr. Robinson is
responsible for overseeing the financial control and corporate governance structures of Alfa Groups holding company and its subsidiary structures. Mr. Robinson serves on the Supervisory Board of the Consortium Alfa Group and on the supervisory
boards of three of Alfa Groups major subsidiary structures. Prior to joining Alfa Group, Mr. Robinson spent six years with Price Waterhouse (now PricewaterhouseCoopers) in the firms audit and business advisory group, four of which were
in the firms Moscow office and two years as a senior manager responsible in the firms St. Petersburg office. Mr. Robinson trained and qualified as a Chartered Accountant with Touch Ross, London, U.K., and is a member of the Institute of
Chartered Accountants in England and Wales. Mr. Robinson received a diploma in accounting from Norwich City College of Further and Higher Education in the United Kingdom.



B.    Compensation



We paid our directors, senior managers and audit commission members an aggregate of approximately US$9.2 million for services provided during 2003,
including approximately US$2.8 million in stock option payouts.



On June 27, 2003, our shareholders approved a new compensation arrangement for our directors to account for their increased responsibilities in light of recent corporate governance legislative reforms. Specifically, each independent
director currently receives annual compensation of US$50,000. Each director who is not independent receives annual compensation of US$20,000. All of our directors are reimbursed for expenses incurred in connection with service as a member of our
board of directors. Prior to the approval of this new compensation arrangement, directors who were also employees of our company received US$500 for participating in our board meetings, whether conducted in person, by telephone or by written
consent. Directors who were not also employees of our company received US$2,500 for participating in board meetings in person and US$500 for participating in board meetings that took place by telephone or written consent.



In addition, directors who are not employees may participate in a phantom
stock plan, pursuant to which they each receive up to a maximum of 6,000 phantom ADSs. The number of phantom ADSs to be granted to each director is set by the board of directors. The phantom ADSs, which do not involve actual ADSs or shares of common
stock, may be redeemed for cash on the date the director ceases to be a director; provided, however, that directors who are re-elected to the board of directors may redeem such phantom ADSs at any time from the date of his or her re-election to the
date he or she is no longer a director. A director, upon redemption of a phantom ADS, will receive, for each phantom ADS, cash in an amount equal to:



| |  | the amount that the average closing price of one of our ADSs quoted on the NYSE for the three-month period immediately prior to the date of redemption, exceeds
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the closing price of one of our ADSs quoted on the NYSE on the date preceding the grant date of the phantom ADS; provided, however, that the amount paid to a director upon
redemption may not exceed US$10.00 per ADS per year for each one-year term served by the director.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This phantom stock plan for directors replaces the plan that was approved by the shareholders in 1998. As of April 30, 2004, an aggregate of 61,000
phantom ADSs had been granted to our directors under our previous phantom stock plan, of which 61,000 are currently redeemable or are redeemable within 60 days of the date of this Annual Report on Form 20-F.



Our senior managers participate in a separate phantom stock plan, pursuant to
which they receive phantom ADSs in an amount determined by our CEO and General Director. Our board of directors determines the aggregate amount of phantom ADSs that our CEO and General Director may grant to our senior managers in



117



---

##### Table of Contents

each calendar year. For 2004, the board of directors has authorized our CEO and General Director to grant up to 150,000 phantom ADSs to our senior managers
in addition to the 150,000 phantom ADSs that were authorized to be granted in 2003. Phantom ADSs granted under the plan for our senior managers have a term of three years. A senior manager, upon redemption of a phantom ADS, will receive, for each
phantom ADS, cash in an amount equal to:



| |  | the amount that the average closing price of one of our ADSs quoted on the NYSE for the three-month period immediately prior to the date of redemption, exceeds
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the closing price of one of our ADSs quoted on the NYSE on the date preceding the grant date of the phantom ADS; provided, however, that the amount paid to a senior manager upon
redemption may not exceed US$10.00 per ADS per year for each one-year term served by the senior manager.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A senior manager may redeem up to 50.0% of the phantom ADSs granted to him or her on or after the first anniversary of the grant date. The remaining 50.0%
of the phantom ADSs may be redeemed on or after the second anniversary of the grant date. In the event of the termination of employment of a senior manager, any phantom ADSs that have not yet become redeemable will terminate. Our board of directors
may also decide to grant phantom ADSs to our CEO and General Director under the plan for our senior managers. As of April 30, 2004, an aggregate of 225,000 phantom ADSs had been granted to our senior managers, of which 60,000 are currently
redeemable or will become redeemable within 60 days of the date of this Annual Report on Form 20-F. No phantom ADSs have been issued to our CEO and General Director.



Our senior managers and members of our audit commission are also eligible to participate in our 2000 stock option plan.



On June 27, 2003, our shareholders approved a new compensation
arrangement for audit commission members to account for their increased responsibilities in light of recent corporate governance legislative reforms. Specifically, the chairman of our audit commission receives annual compensation of US$50,000 and
each of the other members of our audit commission receives annual compensation of US$20,000. All of the members of our audit commission are reimbursed for expenses incurred in connection with service as a member of our audit commission. Prior to the
approval of this new compensation arrangement, the members of the audit commission received annual compensation in the amount of US$3,000 plus US$500 for participating in each audit commission meeting. In addition, the members of our audit
commission were reimbursed for expenses incurred in connection with service on our audit commission.



We have entered into indemnification agreements with each of our directors, senior managers and members of our audit commission pursuant to which we have
agreed to indemnify each of them for all expenses incurred in connection with claims, suits or proceedings arising out of his or her performance of his or her duties as a director, senior manager or member of our audit commission.



We have obtained insurance on behalf of our senior managers, directors and
members of our audit commission for liability arising out of their actions in their capacity as a senior manager, director or member of our audit commission.



We do not have any pension, retirement or similar benefit plans available to our directors, senior managers or audit commission members.



C.    Board Practices



Our board of directors currently consists of nine persons, four of whom were
nominated by Alfa Group, four of whom were nominated by Telenor and one of whom was nominated by Telenor and approved by Alfa Group. The members of our current board of directors were elected at the June 27, 2003 annual general meeting of our
shareholders and will serve until our next annual general meeting of shareholders on May 26, 2004, unless the



118



---

##### Table of Contents

board in its entirety is terminated prior to the expiration of its term upon a decision of our shareholders. In accordance with Russian law, if a board
member submits a resignation, the resignation should be accepted by shareholders at a general meeting in order to be effective. The current board of directors has been nominated for election to the board of directors to serve until the annual
general meeting of shareholders in 2005.



We have not entered
into any service contracts with any of our current directors providing for benefits upon termination of service.



Our management advisory committee, which is chaired by our CEO and General Director, has the authority to implement the decisions of our shareholders and
board of directors and to advise the CEO and General Director on the management of our day-to-day activities. The management advisory committee comprises our senior managers, and all decisions of this management advisory committee remain subject to
the approval or veto of our CEO and General Director.



Our
audit commission is currently comprised of Alexander Gersh, Knut Giske and Nigel Robinson. We are required under Russian law and our charter to maintain an audit commission. Our audit commission assists our company with oversight responsibility and
reviews our systems of internal controls and our auditing, accounting and financial reporting processes. Under Russian law and our charter, a member of our audit commission may not simultaneously serve as a member of our board of directors or hold a
management position in our company, such as CEO or General Director.



D.    Employees



As of
December 31, 2003, we had approximately 6,260 full time and contract employees working for us in various capacities, including approximately 13 in executive and managerial positions, approximately 1,478 in engineering and construction, approximately
1,294 in sales and marketing, approximately 1,144 in finance, administration and other support functions, approximately 1,804 in subscriber service, approximately 73 in site acquisitions and regional projects and approximately 458 in our products
department. We had approximately 4,670 full time and contract employees working for us in various capacities as of December 31, 2002. We have not experienced any work stoppages and consider relations with our employees to be good.



E.    Share Ownership



As of April 30, 2004, our directors and senior managers beneficially owned
an aggregate of 131,700 shares of our common stock, representing approximately 0.28% of our voting stock. As of April 30, 2004, none of our directors or senior managers beneficially owned more than 1.0% of any class of our capital stock.



In December 2003, we amended and restated our 2000 Stock Option Plan,
which was originally adopted by our Board of Directors on December 20, 2000. The purpose of the plan is to grant options to certain of our officers, employees, directors and consultants to acquire shares of common stock of our company. Options are
granted by VC ESOP N.V., an indirect wholly-owned subsidiary of our company. Our stock option plan is administered by a three-person committee, appointed by VC ESOP N.V., that determines to whom options are granted under the plan, the number of
options that are granted and the terms and conditions of option grants, including the exercise price per share. The stock option plan authorizes the issuance of options to acquire up to 250,000 of our shares of common stock. As of April 30, 2004,
89,500 options to acquire shares of our common stock were outstanding, of which 38,500 options are currently exercisable or are exercisable within 60 days of the date of this Annual Report on Form 20-F.



The exercise prices of the 89,500 options outstanding as of April 30, 2004
ranged from US$23.60 per share (US$17.70 per ADS) to US$52.40 per share (US$39.30 per ADS). The options granted vest at varying rates over two to three year periods and vesting periods for certain employees will be accelerated if certain events
specified in the stock option plan occur. The 89,500 currently exercisable options outstanding as of April 30, 2004 are exercisable until dates ranging from the present date to December 2006.



119



---

##### Table of Contents

If a plan participant ceases to be an employee of our company or any of our affiliates (other than due to
death or disability or for cause) or ceases to otherwise be eligible to participate in the plan, the individual will have the right to exercise vested options for the earlier of 45 days after the date of termination of employment and December 31,
2006.



In case of death or permanent disability of a plan
participant, his or her beneficiaries will automatically acquire the right to exercise those options that have vested prior to the death or permanent disability for the earlier of 190 days and 90 days in the event of death and permanent disability,
respectively, and December 31, 2006.



If a plan participant
ceases to be an employee of our company or any of our affiliates for cause, then the right to exercise options will terminate immediately unless waived by the stock option committee discussed above.



|ITEM 7. | Major Shareholders and Related Party Transactions
|------- | -------------------------------------------------



A.    Major Shareholders



The following table sets forth information regarding those shareholders of our company that we have ascertained from public filings beneficially owned
5.0% or more of either class of our capital stock as of April 30, 2004. As of April 30, 2004, we had 40,332,201 issued and outstanding shares of common stock and 6,426,600 issued and outstanding shares of preferred stock. None of our major
shareholders have different voting rights.



|                          |  |                       |  |                       |   |  |                           |  |                        
|------------------------- |  | --------------------- |  | --------------------- | - |  | ------------------------- |  | -----------------------
|Shareholder               |  | Number ofCommonShares |  | Percent ofCommonStock |   |  | Number of PreferredShares |  | Percent of Voting Stock
|Telenor East Invest AS(1) |  | 11,689,713            |  | 28.98                 | % |  |                          |  | 25.0% plus 13 shares   
|Eco Telecom Limited(2)    |  | 5,263,102             |  | 13.05                 | % |  | 6,426,600                 |  | 25.0% plus two shares  
|FMR Corp.(3)              |  | 3,210,457             |  | 7.96                  | % |  |                          |  | 6.9 %                  

---

|(1) | As reported on Schedule 13D, Amendment No. 17, dated September 12, 2003, filed by Telenor East Invest AS with the Securities and Exchange Commission, or the SEC. Telenor has been
granted registration rights with respect to the shares of common stock held by it.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As reported on Schedule 13D, Amendment No. 6, dated on September 8, 2003, filed by Eco Telecom Limited, part of the Alfa Group of companies, with the SEC. Each share of our
preferred stock is entitled to one vote. Eco Telecom Limited has been granted registration rights with respect to the shares of common stock held by it.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | As reported on Schedule 13G, dated on February 17, 2004, filed by FMR Corp. with the SEC.
|--- | -----------------------------------------------------------------------------------------



Significant changes in the percentage ownership held by our major shareholders during the last three years are set forth
below in B. Related Party Transactions.



Based on the holdings of our common stock at April 30, 2004, we estimate that approximately 56.5% of our common stock was held in the United States by The Bank of New York, as depositary on behalf of approximately 6,350 holders of ADSs.



B.    Related Party Transactions



Alfa Group/Telenor Transaction



Overview



On November 5, 2001, Alfa Group, through Eco Telecom Limited, part of the Alfa Group of companies, completed the purchase of
5,150,000 newly-issued common shares for US$103.0 million. Pursuant to the terms of the transaction agreements, which were signed on May 30, 2001, we contributed this US$103.0 million



120



---

##### Table of Contents

(together with an additional US$15.6 million of our own funds, at the exchange rate as of the date of contribution) as equity to VimpelCom-Region,
representing the first of three tranches of equity investments.



In addition to Alfa Groups purchase of newly-issued shares from our company, on November 5, 2001, Alfa Group also purchased 6,426,600 preferred shares and 113,102 common shares, for an aggregate consideration of approximately US$26.9
million, from entities controlled by Dr. Dmitri Zimin, our founder and honorary President. In addition, in order to maintain its percentage ownership interest in our company, Telenor purchased 3,744 common shares that we were holding as treasury
shares for a purchase price of approximately US$74,880 and 1,233,369 common shares from entities controlled by Dr. Zimin, for approximately US$24.6 million. The foregoing transactions resulted in Alfa Group owning 25.0% plus two shares of our voting
capital stock and Telenor owning 25.0% plus 13 shares of our voting capital stock.



On December 3, 2001, as contemplated by the agreements signed on May 30, 2001, VimpelCom-Region sold to Alfa Group 1,323 newly-issued shares of Type-A convertible voting preferred stock of VimpelCom-Region for an
aggregate purchase price of approximately US$442.40. In addition, on December 3, 2001, we sold to Alfa Group one share of common stock of VimpelCom-Region for a purchase price of 1,196,000 rubles, or approximately US$40,000. These acquisitions
resulted in Alfa Group owning 25.0% plus one share of the outstanding voting capital stock of VimpelCom-Region as of December 3, 2001.



On November 12, 2002, the second tranche of equity investments in VimpelCom-Region was completed when Alfa Group, Telenor and VimpelCom each purchased
1,462 common newly-issued shares for approximately US$58.5 million each. In addition, the preferred stock beneficially owned by Alfa Group was redistributed among Alfa Group, VimpelCom and Telenor so that each party owned the same percentage of the
voting capital stock of VimpelCom-Region that each would have owned had the preferred stock not been issued to Alfa Group. On August 27, 2003, Alfa Group completed the third and final tranche of equity investment in VimpelCom-Region by purchasing
1,463 newly-issued common shares for approximately US$58.5 million. Following the third tranche of Alfa Groups equity investment in VimpelCom-Region, Alfa Group owns 29.8% of VimpelCom-Regions outstanding voting capital stock. VimpelCom
and Telenor own 55.3% and 14.9%, respectively, of the voting stock of VimpelCom-Region.



Our shareholders approved at our annual general meeting of shareholders on May 15, 2002 amendments to the Primary Agreement, dated as of May 30, 2001, by and among VimpelCom, VimpelCom-Region, Alfa Group and Telenor,
as well as certain other matters relating to the financing of VimpelCom-Region. The amended Primary Agreement and related documentation, effective as of May 15, 2002, provide, among other things, that:



| |  | We will provide VimpelCom-Region with a combination of secured loans, guarantees of VimpelCom-Region debt and/or leases of equipment and other assets with a total value of up to
US$92.0 million, and each with terms of up to six years, either directly or through a subsidiary. The value of the leases will be the depreciated value of the equipment and other assets determined when entering into the leases. We will also provide
VimpelCom-Region with unsecured credits, either directly or through a subsidiary, of up to US$30.0 million, with terms of up to six years.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | To the extent that external financing is not obtained by February 2005 in an amount necessary to meet VimpelCom-Regions five-year funding plan, VimpelCom-Region will give each
of its shareholders the opportunity to contribute to its capital in the amount of cash necessary to make up the funding shortfall on a pro rata basis. In exchange for such capital contribution, each contributing shareholder will receive newly-issued
shares of common stock of VimpelCom-Region. If any shareholder does not exercise its right to make such contribution in full, the other shareholders will have the right to contribute all or a portion of such shareholders funding shortfall on a
pro rata basis. The shareholders of VimpelCom-Region are required to vote in favor of and take all actions necessary to effect the issuance of shares of common stock in connection with such contributions, on the condition that the aggregate amount
of the additional funds raised by VimpelCom-Region (excluding the capital increases in connection with the closings of the second and third tranches in November 2002 and November 2003) will not exceed US$300.0 million; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



121



---

##### Table of Contents

| |  | VimpelCom-Regions board of directors was disbanded as part of an effort to create a unified management structure of VimpelCom and VimpelCom-Region, as discussed below.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Registration Rights



Alfa Group, Telenor and our company also entered into a registration rights
agreement on May 30, 2001, which provides Alfa Group and Telenor with demand and piggyback registration rights with respect to our ADSs and shares of our common stock, but not with respect to any warrants or other securities convertible into or
exchangeable for our common stock. Demand and piggyback registration rights may be assigned to permitted transferees and other persons who hold, in the aggregate, at least 25.0% plus one share of our voting capital stock.



Pursuant to the demand registration right, if we receive a written request
from Alfa Group or Telenor to effect a registration of ADSs and/or shares of our common stock under the Securities Act, the anticipated aggregate offering price of which exceeds US$20.0 million, we will (subject to certain exceptions), as soon as
practicable after receipt of the demand, use our best efforts to effect a registration covering these securities. The registration rights agreement also provides that we will not, without the prior written consent of Alfa Group and Telenor, include
any of our securities, or the securities of any other person, in any such registration.



Pursuant to the piggyback registration right, if we register any of our securities in connection with an underwritten offering and sale for cash, either for our own account or the account of another one of our
shareholders exercising its demand registration right, then we will (subject to certain exceptions) include any ADSs and/or shares of our common stock that Alfa Group and/or Telenor requests to be included in that registration. Any single request
made by Alfa Group or Telenor pursuant to its piggyback registration right may not exceed an aggregate of 50.0% of the ADSs or our common stock that it owns at the time of such request, unless it holds less than 7.5% of our issued and outstanding
common stock at such time. The piggyback registration right, however, is conditioned on Alfa Group or Telenor, as the case may be, owning or controlling at least 5.0% of our issued and outstanding common stock.



In addition, the rights and obligations of Alfa Group and Telenor,
respectively, under the registration rights agreement (other than indemnification rights and obligations) will terminate on the date that such shareholder owns less than 5.0% of our issued and outstanding common stock.



The agreements also contemplate piggyback registration rights related to
VimpelCom-Region if VimpelCom-Region proposes to register any of its common stock or ADRs under the Securities Act, with certain exceptions.



Restrictions on VimpelCom and VimpelCom-Region Share Transfers; Right of First Refusal, Drag Along and Co-Sale Rights Related to VimpelCom-Region Shares



In connection with the agreements signed on May 30, 2001,
Alfa Group and Telenor agreed to certain transfer restrictions regarding shares of our company and VimpelCom-Region owned by each of them. These restrictions include a prohibition on transfers to direct competitors of our company and
VimpelCom-Region.



Pursuant to the terms of a shareholders
agreement, dated as of May 30, 2001, among us, Alfa Group, Telenor and VimpelCom-Region, as amended on May 15, 2002, which we refer to in this Annual Report on Form 20-F as the VimpelCom-Region shareholders agreement, a VimpelCom-Region
shareholder has certain rights and is subject to certain other restrictions on the transfer of its VimpelCom-Region securities, including:



| |  | a right of first refusal in favor of the other shareholders of VimpelCom-Region;
| | - | --------------------------------------------------------------------------------



| |  | a drag-along obligation to sell that shareholders VimpelCom-Region securities upon the request of another shareholder of VimpelCom-Region who is selling securities
representing more than 50.0% of VimpelCom-Regions outstanding voting securities;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



122



---

##### Table of Contents

| |  | a co-sale right in favor of the other shareholders of VimpelCom-Region; and
| | - | ---------------------------------------------------------------------------



| |  | certain restrictions on pledging shares.
| | - | ----------------------------------------



VimpelCom Board of Directors



Under the terms of a shareholders agreement, dated as of May 30, 2001, Telenor and Alfa Group have certain rights to nominate candidates to our
board of directors. For a summary discussion of Telenors and Alfa Groups nomination rights, please refer to the section of this Annual Report on Form 20-F entitled Item 6Directors, Senior Management and
EmployeesDirectors and Senior Management.



The Unified
Management Structure of VimpelCom-Region and VimpelCom



On
May 24, 2002, the board of directors of VimpelCom-Region was disbanded in favor of a unified management structure with VimpelCom. Under this unified structure, the General Director of VimpelCom-Region reports to the CEO and General Director of
VimpelCom. Key issues with respect to the business of VimpelCom-Region are referred to the shareholders of VimpelCom-Region. We have agreed to vote our shares of VimpelCom-Region in accordance with decisions approved by at least 80.0% of all of the
members of our board of directors in accordance with the procedural regulations of our board of directors. Management unification was intended to increase the operational synergies between VimpelCom and VimpelCom-Region and accelerate the pace of
our national expansion.



Under the terms of the
VimpelCom-Region shareholders agreement currently in effect, the General Director of VimpelCom-Region is appointed by a simple majority vote of the shareholders of VimpelCom-Region. We own a majority of the voting shares of VimpelCom-Region.
Pursuant to the Procedural Regulations of our board of directors, our CEO and General Director has the sole authority to vote our shares with respect to the appointment of the General Director of VimpelCom-Region.



Possible Business Combination Between VimpelCom and VimpelCom-Region



On August 28, 2003 our board of directors recommended to our shareholders to
approve the merger of VimpelCom and VimpelCom-Region and the related issuance of new common shares in exchange for the 44.7% stake in VimpelCom-Region that we do not currently own. These recommendations were submitted for shareholder approval at an
Extraordinary General Meeting of Shareholders of VimpelCom held in Moscow on October 24, 2003. The shareholders at the Extraordinary General Meeting of Shareholders overwhelmingly approved the merger of VimpelCom and VimpelCom-Region, with more than
99.6% of the voted shares in favor of the merger and the related issuance of 10,948,821 new common shares (the equivalent of 14,598,428 ADSs) in exchange for a 44.7% stake in VimpelCom-Region. As interested parties to a number of the proposed
transactions, Alfa Group and Telenor were not eligible to vote on certain resolutions. On a fully diluted basis, the issue of new common shares of VimpelCom represents a 21.4% economic dilution for the shareholders of VimpelCom. The proposed
exchange of shares reflected a valuation ratio of 0.91:1 between VimpelCom-Region and the rest of our company (predominantly our Moscow business), implying that 33.6% of VimpelComs market capitalization at that time was attributable to our
55.3% stake in VimpelCom-Region. Upon completion of the merger, Telenor will own approximately 26.6% and 29.9%, respectively, and Alfa Group will own approximately 32.9% and 24.5%, respectively, of the companys total voting stock and total
common stock, respectively.



Non-Competition Agreement



Subject to certain exceptions, Telenor and Alfa Group have agreed not to,
and have agreed not to permit any of their respective controlled affiliates to, engage in wireless mobile telecommunications businesses in Russia or own or control, directly or indirectly, more than 5.0% of the voting capital stock of any person or
company



123



---

##### Table of Contents

engaged in a wireless mobile telecommunication business in Russia, other than VimpelCom, VimpelCom-Region and other of our controlled subsidiaries and
investments held prior to May 30, 2001. These restrictions apply to Telenor and Alfa Group so long as they own at least 25.0% plus one share of VimpelComs or VimpelCom-Regions voting capital stock.



In August 2003, our board of directors approved the granting of consent by
our company to the Alfa Groups purchase of an indirect 25.1% equity stake in the Russian cellular operator, MegaFon. The consent contemplates that the parties will explore a possible business combination between MegaFon and our company in the
future.



Acquisitions from Telenor



In December 2002, VimpelCom-Region acquired from Telenor and another
shareholder 100.0% of the outstanding shares of Extel, the largest mobile telecommunications service provider in the Kaliningrad region, for a purchase price of approximately US$25.3 million. VimpelCom-Region acquired 49.0% of these shares from
Telenor. In addition, we agreed to extend a US$10.0 million credit line to Extel to replace an existing credit line previously guaranteed by Telenor.



During 2003, VimpelCom-Region acquired through two separate transactions 100.0% of the outstanding shares of StavTeleSot, the largest mobile
telecommunications service provider in the Stavropol region, for an aggregate purchase price of approximately US$43.1 million. VimpelCom-Region acquired a total of 49.0% of these shares from Telenor. In addition, we agreed to extend a credit line to
StavTeleSot in the amount of approximately US$9.2 million in order for StavTeleSot to repay a bank loan previously guaranteed by Telenor.



Service Obligation Agreements



In October 2003, we entered into a service obligation agreement with a subsidiary of Telenor that requires Telenor to provide us services related to
telecommunications operations, including management advisory services, technical assistance and maintenance of network systems and equipment, industry information research and consulting, training of personnel and other services. The annual fee for
the services is the equivalent of US$3.5 million, which is paid in monthly installments in Russian rubles. Telenor may elect to issue quarterly invoices with payment to Telenor in either Russian rubles or U.S. dollars, in which case the amount of
each such invoice shall be treble the amount of a monthly invoice. The agreement specifies the rights and obligations of the parties to any intellectual property developed in connection with the agreement. We had a similar service obligation
agreement with Telenor between April 1999 and October 2003. Under that agreement we paid Telenor US$0.8 million and US$9.5 million in 2002 and 2003, respectively. Secondees provided by Telenor to our company included our former CEO and General
Director, Jo Lunder, and a number of other senior employees with substantial technical and industry expertise.



In October 2003, we entered into a service obligation agreement with a subsidiary of Alfa Group that requires Alfa Group to provide us services related to
telecommunications operations including management advisory services, technical assistance and maintenance of network systems and equipment, industry information research and consulting, training of personnel, support of implementation of certain
projects, assignment of qualified personnel and other services. The annual fee for the services is the equivalent of US$3.5 million, which is paid in monthly installments in Russian rubles. The invoice amount shall be the equivalent of 1/12 of the
annual fee. Alfa Group may elect to issue quarterly invoices, in which case the amount of the invoice shall be treble the amount of the monthly installment. The agreement specifies the rights and obligations of the parties to any intellectual
property developed in connection with the agreement.



VimpelCom
has entered into a Services Agreement dated as of August 28, 2003 with Eco Telecom Limited and its affiliate Alfa-Eco M to obtain assistance in re-assigning the licenses and frequencies of VimpelCom-Region to VimpelCom in connection with the merger
of VimpelCom-Region into VimpelCom. The Services Agreement provides for remuneration of US$3.5 million to be paid on the merger date.



124



---

##### Table of Contents

Agreements with Combellga and Sovintel



As part of our strategy to attract new large corporate subscribers, we have entered into agreements with competitive local
exchange carriers Combellga and Sovintel, which together control over 33.0% of their market. Combellga and Sovintel are wholly-owned by Golden Telecom. Alfa Group and Telenor own 40.0% and 19.5%, respectively, of Golden Telecom. In 2002, we paid
approximately US$1.9 million to Combellga and approximately US$6.3 million to Sovintel under these agreements. In 2003, we paid approximately US$5.1 million to Combellga and approximately US$33.5 million to Sovintel under these agreements.



In addition, in 2003, VimpelCom-Region entered into an
agreement with Sovintel for the construction of our network in St. Petersburg.



Agreements with Alfa Bank



We and
VimpelCom-Region maintain some of our bank accounts at Alfa Bank, which is part of the Alfa Group of companies. Under the terms of our boards approval, there is a US$25.0 million limit on the amount of our cash balances held at, and our
advances to, Alfa Bank. As of March 31, 2004, we had balances at Alfa Bank of approximately US$4.6 million, excluding VimpelCom-Regions permanent balances of up to US$2.0 million. In addition, we currently have an agreement with Alfa Bank that
allows them to send SMSs to our subscribers who also are clients of Alfa Bank.



Loans to Employees



We have provided loans to
some of our employees, including certain of our senior managers, in order for them to make house or apartment purchases. These loans are unsecured and are interest free. As of December 31, 2003, we had approximately US$0.3 million of employee loans
outstanding. The loans mature on various dates and the last current repayment date for an outstanding loan is September 2008. No additional loans have been made to employees and no outstanding loans have been amended or extended since January 1,
2004.



|C. | Interests of Experts and Counsel.
|-- | ---------------------------------



Not applicable.



|ITEM 8. | Financial Information
|------- | ---------------------



|A. | Consolidated Statements and Other Financial Information
|-- | -------------------------------------------------------



See Item 18Financial Statements and the financial statements referred to therein.



|B. | Significant Changes
|-- | -------------------



Other than as disclosed below or otherwise in this Annual Report on Form 20-F, there have not been any significant changes since the date of the audited
financial statements included as part of this Annual Report on Form 20-F.



On March 31, 2004, we furnished to the SEC under cover of Form 6-K a press release stating our intention to raise, subject to market and other conditions, approximately US$300.0 million of debt financing by the
issuance of notes in the international bond markets. The offering of the notes is currently anticipated to close during the second quarter of 2004, but there can be no assurance that we will be able to complete this proposed offering. The notes will
not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The information in this Annual Report on Form 20-F
about the proposed offering of notes shall not constitute an offer



125



---

##### Table of Contents

to sell or the solicitation of an offer to buy the notes, nor shall there be any sale of the notes in any state in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities laws of any such state.



In April 2004, Sberbank provided our company with a five-year U.S. dollar-denominated secured non-revolving credit line of US$130.0 million. The credit
line bears interest at the rate of 8.5% per annum, which may change upon the occurrence of certain events, such as a change in Russian law or a change in the interest rate of the Central Bank of Russia. The credit line is repayable in eight equal
quarterly installments over a two-year period, beginning on February 27, 2007 and ending on April 14, 2009. To date, we have not drawn down any amount under this facility. The end of the drawdown period under the credit line falls on April 15, 2005.



On May 7, 2004, we announced the interest rate of 9.9% for the
third and subsequent semi-annual interest payments on Russian ruble-denominated bonds, issued on May 20, 2003 in an aggregate principal amount of 3 billion Russian rubles through VimpleCom Finance, or approximately US$101.9 million at the
Central Bank of Russia exchange rate on December 31, 2003. The bonds are guaranteed by VimpleCom-Region and are scheduled for repayment on May 16, 2006. Bondholders have a put option exercisable between May 9 and May 18, 2004 at 100% of the
nominal value of the bonds. The annual interest rate for the first two payments was 8.8%.



|ITEM 9. | The Offer and Listing
|------- | ---------------------



|A. | Offer and Listing Details
|-- | -------------------------



Price history



Each of our ADSs represents three-quarters of one share of our common stock. The following table sets forth, for the periods indicated, the reported high
and low sales prices of our ADSs on The New York Stock Exchange and our common stock on the Russian Trading System, or RTS. There has been very limited trading of our common stock on the RTS.



126



---

##### Table of Contents

For the purposes of this Annual Report on Form 20-F, the high and low prices of our common stock on the
RTS are determined by the high and low amounts brokers have bid for our common stock during the periods indicated below.



|                    |  |                                                 |        |                                                        |     |       |  |     |        |  |     |       
|------------------- |  | ----------------------------------------------- | ------ | ------------------------------------------------------ | --- | ----- |  | --- | ------ |  | --- | ------
|                    |  | New York Stock Exchange Price Range of our ADSs |        | Russian Trading System Price Range of our Common Stock
|Year Ended December |  | High                                            |        | Low                                                    |     | High  |  | Low
|1999                |  | US$                                             | 45.88  |                                                        | US$ | 12.19 |  |     |       |  |     |      
|2000                |  | US$                                             | 53.19  |                                                        | US$ | 12.06 |  | US$ | 40.00  |  | US$ | 14.50 
|2001                |  | US$                                             | 28.60  |                                                        | US$ | 12.50 |  | US$ | 30.00  |  | US$ | 15.00 
|2002                |  | US$                                             | 36.40  |                                                        | US$ | 20.62 |  | US$ | 47.00  |  | US$ | 20.00 
|2003                |  | US$                                             | 73.65  |                                                        | US$ | 30.00 |  | US$ | 92.00  |  | US$ | 40.50 
|                    |  |                                                 |        |                                                       
|                    |  | High                                            |        | Low                                                    |     | High  |  | Low
|2002:               |  |                                                 |        |                                                        |     |       |  |     |        |  |     |       
|First quarter       |  | US$                                             | 34.75  |                                                        | US$ | 25.30 |  | US$ | 38.00  |  | US$ | 26.00 
|Second quarter      |  | US$                                             | 32.75  |                                                        | US$ | 22.26 |  | US$ | 37.00  |  | US$ | 28.00 
|Third quarter       |  | US$                                             | 27.50  |                                                        | US$ | 20.62 |  | US$ | 33.25  |  | US$ | 20.00 
|Fourth quarter      |  | US$                                             | 36.40  |                                                        | US$ | 23.65 |  | US$ | 47.00  |  | US$ | 30.50 
|2003:               |  |                                                 |        |                                                        |     |       |  |     |        |  |     |       
|First quarter       |  | US$                                             | 39.85  |                                                        | US$ | 30.00 |  | US$ | 49.50  |  | US$ | 40.50 
|Second quarter      |  | US$                                             | 48.00  |                                                        | US$ | 34.75 |  | US$ | 62.50  |  | US$ | 45.25 
|Third quarter       |  | US$                                             | 63.44  |                                                        | US$ | 39.05 |  | US$ | 82.00  |  | US$ | 50.00 
|Fourth quarter      |  | US$                                             | 73.65  |                                                        | US$ | 58.25 |  | US$ | 92.00  |  | US$ | 45.00 
|2004:               |  |                                                 |        |                                                        |     |       |  |     |        |  |     |       
|First quarter       |  | US$                                             | 105.05 |                                                        | US$ | 68.89 |  | US$ | 129.00 |  | US$ | 90.00 
|                    |  |                                                 |        |                                                       
|                    |  | High                                            |        | Low                                                    |     | High  |  | Low
|2003:               |  |                                                 |        |                                                        |     |       |  |     |        |  |     |       
|Month Ended         |  |                                                 |        |                                                        |     |       |  |     |        |  |     |       
|November            |  | US$                                             | 69.50  |                                                        | US$ | 58.25 |  | US$ | 89.50  |  | US$ | 77.00 
|December            |  | US$                                             | 73.65  |                                                        | US$ | 62.50 |  | US$ | 92.00  |  | US$ | 82.00 
|2004:               |  |                                                 |        |                                                        |     |       |  |     |        |  |     |       
|Month Ended         |  |                                                 |        |                                                        |     |       |  |     |        |  |     |       
|January             |  | US$                                             | 80.14  |                                                        | US$ | 68.89 |  | US$ | 102.00 |  | US$ | 90.00 
|February            |  | US$                                             | 86.68  |                                                        | US$ | 69.50 |  | US$ | 110.00 |  | US$ | 90.00 
|March               |  | US$                                             | 105.05 |                                                        | US$ | 85.03 |  | US$ | 129.00 |  | US$ | 108.00
|April               |  | US$                                             | 109.21 |                                                        | US$ | 88.00 |  | US$ | 140.00 |  | US$ | 120.00



On April 30, 2004, the
closing price per ADS on The New York Stock Exchange was US$89.76.



|B. | Plan of Distribution
|-- | --------------------



Not required.



|C. | Markets
|-- | -------



Our ADSs have been listed and traded since November 15, 1996 on The New York Stock Exchange under the symbol VIP. The New York Stock Exchange
is the principal trading market for the ADSs. In July 2000, the RTS approved the listing of our common stock. Our common stock began trading on the RTS on July 14, 2000.



|D. | Selling Shareholders
|-- | --------------------



Not required.



127



---

##### Table of Contents

|E. | Dilution
|-- | --------



Not required.



|F. | Expenses of the Issue
|-- | ---------------------



Not required.



|ITEM 10. | Additional Information
|-------- | ----------------------



|A. | Share Capital
|-- | -------------



Not required.



|B. | Memorandum and Articles of Association
|-- | --------------------------------------



We describe below the material provisions of our charter, certain provisions of Russian law relating to our organization and operation, and some of the
terms of our capital stock based on provisions of our current charter, applicable Russian law and certain agreements relating to our capital stock. Although we believe that we have summarized the material terms of our charter, Russian legal
requirements, and our capital stock, this summary is not complete and is qualified in its entirety by reference to our charter, applicable Russian law and the agreements relating to our capital stock.



Open Joint Stock Company



We were founded as a closed joint stock company in September 1992 and
reorganized into an open joint stock company in July 1993. The primary difference between these two types of entities relates to the issuance and transferability of shares. Shares of an open joint stock company are freely transferable and may be
offered to the public, while shares of a closed joint stock company are subject to certain transfer restrictions and may not be offered to the public. Our initial charter was registered with the Moscow Registration Chamber and our registration
number is 015624. On August 28, 2002, we were entered by the Russian Ministry for Taxes and Excise into the Unified State Register of Legal Entities Registered Prior to July 1, 2002 under state registration number 1027700166636.



As of the date of this Annual Report on Form 20-F, our charter capital is
233,794.005 rubles, consisting of 40,332,201 issued and outstanding shares of common stock, with a nominal value of 0.005 rubles each, and 6,426,600 issued and outstanding shares of preferred stock, with a nominal value of 0.005 rubles each. Shares
of our common stock held by our subsidiaries are treated as treasury shares for U.S. GAAP purposes but are not treated as such for purposes of Russian law. None of our shares of common or preferred stock are held in treasury for purposes of Russian
law. Our charter authorizes us to issue an additional 49,667,799 shares of common stock, with a nominal value of 0.005 rubles each. As our shares of common stock and preferred stock have equal voting rights, we sometimes refer to them collectively
as voting shares. Under Russian law, the total nominal value of all outstanding shares of our preferred stock may not exceed 25.0% of our charter capital.



Our Goals and Objectives



As set forth in Article 4.1 of our charter, we have the following goals:



| |  | research, design and manufacture of radioelectronic communication systems and their components;
| | - | -----------------------------------------------------------------------------------------------



| |  | operation and offering of services of national and international wireless telecommunications in Moscow, as well as in various parts of Russia and the Commonwealth of Independent
States;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | establishment of joint-venture companies, telephone companies, and other companies and enterprises for the purpose of establishment and operation of systems of telecommunications in
various parts of Russia and the Commonwealth of Independent States; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | earning profit.
| | - | ---------------



128



---

##### Table of Contents

As set forth in Article 4.2 of our charter, we have the following objectives:



| |  | research and design in the field of radioelectronic systems, or RES, of communication, informatics, telematics and in the related fields of science and technology;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | creation of means and systems of communication, including rapid-deploying systems of radiotelephone communication for fixed and mobile subscribers, designs, systems of cable,
trunks, fiber-optic, point-to-point, satellite and other types of communication systems, creation of teleports and telecommunication networks;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | design, engineering and manufacture of the radioelectronic equipment for RES systems;
| | - | -------------------------------------------------------------------------------------



| |  | designs in the field of new standards and software and hardware complexes for satellite and ground types of systems of communication;
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| |  | provision of communication services to companies and individuals in Russia and abroad on the basis of commercial use of established communication systems including different types
of cellular, cable, trunks, fiber-optic, point-to-point, satellite and other types of communication systems, including international communication systems;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | provision of consulting and information services, engineering and marketing, investment and innovation activities, leasing, provision of dealer, distributorship, broker and agency
representation services;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | carrying out commercial operations with know-how, scientific and technical products and information, including receipt and distribution of licenses;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  | publishing activities, provision of advertisement and other activities for the purpose of dissemination of information on our activities and our partners in joint projects;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | organization of personnel training and re-training, conducting seminars, schools of business, organization of courses on the objective of our activities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | participation in establishment of new enterprises to assist in achieving our goals in accordance with applicable legislation;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| |  | carrying out independent foreign economic activity in accordance with applicable legislation of the Russian Federation, in particular, export-import and purchasing agency
operations;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | carrying out leasing activity, including as a leasing company; and
| | - | ------------------------------------------------------------------



| |  | carrying out any other activity not prohibited by applicable law.
| | - | -----------------------------------------------------------------



Common Stock



Except for treasury shares (as defined under Russian law), each fully paid share of common stock entitles its holder to:



| |  | participate in shareholder meetings;
| | - | ------------------------------------



| |  | have one vote on all issues voted upon at a shareholder meeting;
| | - | ----------------------------------------------------------------



| |  | receive dividends recommended by the board of directors and approved by the shareholders;
| | - | -----------------------------------------------------------------------------------------



| |  | in the event of our liquidation, receive a pro rata share of our assets remaining after settlement with our creditors and payment of the fixed liquidation value on our preferred
stock; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | exercise any other rights of a shareholder set forth in our charter and Russian law.
| | - | ------------------------------------------------------------------------------------



Preferred Stock



Except for treasury shares (as defined under Russian law), each fully paid share of preferred stock entitles its holder to:



| |  | participate in shareholder meetings;
| | - | ------------------------------------



| |  | have one vote on all issues voted upon at a shareholder meeting;
| | - | ----------------------------------------------------------------



129



---

##### Table of Contents

| |  | receive an annual fixed dividend of 0.001 ruble per share of preferred stock to the extent sufficient funds are available;
| | - | --------------------------------------------------------------------------------------------------------------------------



| |  | in the event of our liquidation, receive a fixed liquidation value of 0.005 rubles per share of preferred stock; and
| | - | --------------------------------------------------------------------------------------------------------------------



| |  | exercise any other rights of a shareholder set forth in our charter and Russian law.
| | - | ------------------------------------------------------------------------------------



Additionally, each fully paid share of preferred stock is convertible into one share of common stock at any time after June
30, 2016 at the election of the holder of the preferred stock. Upon conversion, the holder must pay us a conversion premium equal to 100% of the market value of one share of common stock at the time of conversion. As of the date of this Annual
Report on Form 20-F, all of the issued and outstanding shares of our preferred stock are owned by Alfa Group. See Item 7Major Shareholders and Related Party TransactionsA. Major Shareholders and B. Related Party
Transactions.



Shareholder Meetings



The rights of shareholders are set forth in the Russian Federal Law on Joint
Stock Companies and in our charter. Shareholders have the right to decide only those issues expressly set forth in the Russian Federal Law on Joint Stock Companies. These issues include:



| |  | charter amendments;
| | - | -------------------



| |  | a reorganization and liquidation;
| | - | ---------------------------------



| |  | the election or removal of members of the board of directors;
| | - | -------------------------------------------------------------



| |  | the determination of the maximum number of shares of common stock and preferred stock, as well as the nominal value and category (type) of, and rights provided by, such shares;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | an increase or decrease of our charter capital; and
| | - | ---------------------------------------------------



| |  | certain transactions with interested parties and certain major transactions.
| | - | ----------------------------------------------------------------------------



Voting at our shareholder meetings is conducted on the principle of one vote per each share of common or preferred stock. However, the election of the
board of directors is conducted by cumulative voting. The holders of common stock and the holders of preferred stock vote together as a single class. Decisions at our shareholder meetings are taken by the affirmative vote of at least a majority of
votes present, except as specifically provided in the Russian Federal Law on Joint Stock Companies. For instance, the Russian Federal Law on Joint Stock Companies and our charter require the affirmative vote of at least 75.0% of the voting shares
present at a shareholders meeting to approve certain decisions, including the following:



| |  | charter amendments;
| | - | -------------------



| |  | a reorganization or liquidation;
| | - | --------------------------------



| |  | the appointment of a liquidation commission;
| | - | --------------------------------------------



| |  | the approval of interim and final liquidation balance sheets;
| | - | -------------------------------------------------------------



| |  | major transactions involving assets in excess of 50.0% of the balance sheet value of our assets, calculated in accordance with Russian accounting standards;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the determination of the maximum number of shares of common stock and preferred stock, as well as the nominal value and category (type) of, and the rights provided by, such shares;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the acquisition of our outstanding shares as provided for by Russian law; or
| | - | ----------------------------------------------------------------------------



| |  | any issuance of shares of our common stock or preferred stock or securities convertible into shares of our common stock.
| | - | ------------------------------------------------------------------------------------------------------------------------



130



---

##### Table of Contents

The quorum requirement for our shareholder meetings is met if more than 50.0% of the voting shares are
present. If the 50.0% quorum requirement is not met, another shareholder meeting will be scheduled and the quorum requirement will be satisfied if at least 30.0% of the voting shares are present.



Shares of our common stock held by any of our subsidiaries are not considered
to be treasury stock under Russian law. We have implemented the following procedures to ensure that shares of our common stock held by our subsidiaries will not dilute the voting rights of existing shareholders and to help us ensure that a quorum is
present at shareholder meetings. Any subsidiary that holds shares of our common stock will ensure that the shares will be considered present at shareholder meetings for purposes of calculating a quorum and will vote such shares pro rata in
accordance with the votes submitted by all other holders of shares. For example, if X% of shares (other than shares held by our subsidiaries) vote in favor of a decision and Y% vote against it or abstain from voting while being present, shares held
by our subsidiaries will be voted X% for and Y% against the decision. If for any reason this mechanism cannot be implemented, then we will ensure that shares owned by our subsidiaries will not be present or voted at any shareholder meeting .



Annual shareholder meetings must be convened by the board of
directors between March 1 and June 30 of each year and the agenda must include the following items:



| |  | the election of members of the board of directors;
| | - | --------------------------------------------------



| |  | the election of members of the audit commission;
| | - | ------------------------------------------------



| |  | the approval of an independent auditor;
| | - | ---------------------------------------



| |  | the approval of the annual reports;
| | - | -----------------------------------



| |  | the approval of the annual financial statements including the profit and loss statement; and
| | - | --------------------------------------------------------------------------------------------



| |  | the distribution of profits and losses.
| | - | ---------------------------------------



Any shareholder or group of shareholders owning in the aggregate at least 2.0% of our voting shares may introduce proposals to the agenda of an annual
shareholder meeting and may nominate candidates to the board of directors and the audit commission. Any proposals or nominations, together with certain other information, including information regarding nominees, must be provided to us by January 30
of each year in order to be included on the agenda.



Extraordinary shareholder meetings may be convened by the board of directors, or at the request of the audit commission, independent auditor or any shareholder or group of shareholders owning in the aggregate at least 10.0% of the voting
shares as of the date of the request.



Notice and Participation



All shareholders entitled to participate in a shareholder
meeting must be notified of a meeting no less than 30 days prior to the date of the meeting, unless a longer period is required by applicable law. All notices, including notifications on convening a shareholder meeting, must be sent to each person
included on the list of persons that have the right to participate in the shareholder meeting, by registered mail or personal delivery against a receipt at the address specified in our shareholder register, or at such other address of which any such
person has informed the board of directors in writing. The agenda may not be changed after its distribution to shareholders. The board of directors shall be responsible for taking all measures necessary to convene a shareholder meeting in accordance
with applicable law.



Foreign Shareholders



Foreign persons registered as individual entrepreneurs in Russia who, and
foreign companies that, acquire shares in a Russian joint stock company must notify the Russian tax authorities within one month following such acquisition if they are already registered with the Russian tax authorities at the time of acquisition.
Russian law is



131



---

##### Table of Contents

unclear as to whether foreign persons and companies that are not registered with the Russian tax authorities at the time of their share acquisitions must
register solely for the reason of such acquisitions. Other than these requirements, there are no requirements or restrictions with respect to foreign ownership of our shares.



Dividends and Dividend Rights



Russian law governs the amount of dividends we may distribute to our shareholders. Under the Russian Federal Law on Joint Stock Companies, dividends may
only be paid out of our net profits for the current year, calculated in accordance with Russian accounting standards; provided, however, that:



| |  | our charter capital has been paid in full;
| | - | ------------------------------------------



| |  | the value of our net assets, calculated in accordance with Russian accounting standards, is not less than the sum of, and would not, as a result of payment of the dividends, fall
below the sum of:
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our charter capital;
| | - | --------------------



| |  | our reserve fund, which is described in greater detail below; and
| | - | -----------------------------------------------------------------



| |  | the difference between the liquidation value set forth in our charter and the nominal value of the issued and outstanding shares of our preferred stock;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | we have repurchased all shares from shareholders who have exercised their right to require us to repurchase their shares, as provided by Russian law; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | we are not, and will not become as a result of the payment of dividends, insolvent (as defined under Russian law).
| | - | ------------------------------------------------------------------------------------------------------------------



The declaration of dividends, which may only be made annually, must be
approved by the affirmative vote of holders of at least a majority of our voting shares at a shareholder meeting, based upon the recommendation approved by at least two-thirds of our board of directors. The dividends approved at a shareholder
meeting may not be more than the amount recommended by our board of directors. Dividends are not payable on treasury shares (as such term is defined under Russian law).



Each fully paid share of preferred stock entitles its holder to receive an annual fixed dividend of 0.001 ruble per share of
preferred stock to the extent there are sufficient funds available. We must pay dividends in full on our preferred stock before making any payments of dividends on our common stock. Dividends on our preferred stock are not cumulative. We may pay
dividends on our preferred stock from funds specifically reserved for this purpose.



Share Capital Increase



Pursuant to Russian
law, we may increase our charter capital by issuing additional shares, provided that sufficient shares of that class are authorized, or by increasing the nominal value of a class of shares. A decision to effect a charter amendment to increase the
number of authorized shares requires the affirmative vote of holders of at least three-quarters of the voting shares present at a shareholder meeting. A decision to increase our charter capital by issuing additional shares or by increasing the
nominal value of a class of shares must be approved by the affirmative vote of holders of at least three-quarters of the voting shares present at a shareholder meeting.



The Russian Federal Law on Joint Stock Companies requires that we sell newly-issued shares at market value, except in
limited cases in which a specified reduction in price is permitted, for example, in connection with the sale of shares to shareholders exercising preemptive rights. In any event, shares may not be sold for a purchase price less than their nominal
value. In the event newly-issued shares are paid for in-kind, the valuation of the in-kind payment must be determined by an independent appraiser.



132



---

##### Table of Contents

The FCSM, under the power given to it by the Federal Law on the Securities Market, has issued detailed
procedures for the registration and issuance of shares of a joint stock company.These procedures may include:



| |  | the registration of a decision to issue shares, which may require the production of a prospectus;
| | - | -------------------------------------------------------------------------------------------------



| |  | public disclosure of certain information about the share issuance;
| | - | ------------------------------------------------------------------



| |  | the registration and public disclosure of a report on the results of the issuance of the shares, which has been approved by the board of directors.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the Russian Federal Law on Investor Protection provides that
newly-issued shares may not be traded until the report on the results of the issuance of the shares is registered and the shares are fully paid.



Capital Decrease and Share Buy-Backs



Under Russian law, our shareholders that vote against or abstain from voting on certain decisions have the right to sell their shares to us at market
value. Our obligation to purchase shares in these circumstances is limited to 10.0% of our net assets calculated at the time the decision is approved and in accordance with Russian accounting standards. In certain cases, the shares must be
immediately canceled and, in other instances, the shares may be held as treasury, but must be re-sold within one year. Decisions that trigger this right to sell shares to us include:



| |  | a reorganization or liquidation;
| | - | --------------------------------



| |  | the approval by shareholders of a major transaction, the value of which comprises more than a certain percentage of our assets (calculated in accordance with Russian
accounting standards), in the event that our board of directors was unable to reach a unanimous decision to approve the transaction; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the amendment of our charter in a manner that limits shareholder rights.
| | - | ------------------------------------------------------------------------



Under Russian law, we may not reduce our charter capital if, after the reduction, our charter capital would be less than the minimum charter capital
required by applicable law. Any decision to reduce our charter capital, whether by repurchasing and canceling shares or by reducing the nominal value of shares, must be approved by at least a majority of voting shares present at a shareholder
meeting. Within 30 days of the approval of such a decision, we must issue a written notice of the decision to our creditors and also publish this decision. Our creditors would then have the right to demand, within 30 days of publication of the
decision or receipt of our notice, repayment of all outstanding amounts due to them, as well as compensation for damages.



Our board of directors may authorize the repurchase of shares for cash provided that the aggregate nominal value of shares outstanding after the
repurchase is at least 90.0% of the nominal value of the outstanding shares prior to the repurchase. We must either resell the repurchased shares within one year of their repurchase or our shareholders must decide to cancel them and, thereby,
decrease our charter capital.



Under the Russian Federal Law on
Joint Stock Companies, we may repurchase our issued shares only if, at the time of repurchase:



| |  | our charter capital has been paid in full;
| | - | ------------------------------------------



| |  | the value of our net assets, calculated in accordance with Russian accounting standards, is not less than the sum of, and would not, as a result of such repurchase, fall below the
sum of:
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | our charter capital;
| | - | --------------------



| |  | our reserve fund, which is described in greater detail below; and
| | - | -----------------------------------------------------------------



| |  | if we are repurchasing shares of our common stock, the difference between the liquidation value of the issued and outstanding shares of our preferred stock set forth in the charter
and the nominal value of the issued and outstanding shares of our preferred stock;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



133



---

##### Table of Contents

| |  | we have repurchased all shares from shareholders who have exercised their right to require us to repurchase their shares, as provided by Russian law; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | we are not, and will not become as a result of the repurchase, insolvent (as defined under Russian law).
| | - | --------------------------------------------------------------------------------------------------------



Preemptive Rights and Certain Anti-Takeover Protections



The Russian Federal Law on Joint Stock Companies grants existing shareholders a preemptive right to purchase on a pro rata
basis shares or securities convertible into shares that we propose to sell in a public offering. In addition, Russian law provides that shareholders who vote against or do not participate in the voting on the placement of shares or securities
convertible into our shares in a closed subscription (private placement) have a pre-emptive right to acquire shares or convertible securities proportionate to their existing holdings of our shares, except if the shares or securities convertible into
shares are placed solely among existing shareholders in proportion to their existing holdings.



We have more than 1,000 holders of ADSs and, accordingly, we comply with the provisions of Russian law applicable to companies with more than 1,000 holders of common stock. Under Russian law, any person intending,
individually or jointly with such persons affiliates, to acquire 30.0% or more of the outstanding shares of common stock, including the number of shares held by such person, of a company with more than 1,000 holders of common stock, is
required to notify the company in writing of such intention no earlier than 90 days and no later than 30 days prior to the day of such acquisition. Unless otherwise provided in the charter or a resolution adopted by holders of at least a majority of
the voting shares present at a shareholder meeting (excluding the votes of the person who, individually or together with such persons affiliates, has acquired 30.0% or more of the issued common stock), then within 30 days of such acquisition,
the person acquiring the 30.0% or more interest must make an offer to buy all of the outstanding shares of common stock and/or securities convertible into shares of common stock. Currently, our charter contains a provision stating that these
requirements will not apply.



However, our charter provides
that any person who, independently or jointly with its affiliates, acquires our voting shares in one or more transactions and, as a result of such transaction or transactions), owns more than 45.0% of our issued and outstanding voting shares, must
make an offer to buy all of the outstanding shares of our common stock at a price no lower than the weighted average price for the purchase of the shares of our common stock, taking into account the prices of purchases on all exchanges and
over-the-counter markets on which the shares of our common stock (or ADSs representing shares of our common stock) are traded, during the six months preceding the date when shares of our common stock were acquired in excess of 45.0% of our issued
and outstanding voting shares. Our charter also sets forth the detailed procedures to be followed when making such an offer.



Shareholders Liability



The Russian Civil Code and the Russian Federal Law on Joint Stock Companies generally provide that shareholders in a Russian joint stock company are not
liable for the obligations of the joint stock company and only bear the risk of loss of their investment. However, under Russian law, our shareholders may be jointly and severally liable with us for any of our obligations under a transaction if:



| |  | they have the ability to issue mandatory instructions to us and that ability is provided for by our charter or in a contract between us and them; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  | we concluded the transaction pursuant to their mandatory instructions.
| | - | ----------------------------------------------------------------------



In addition, our shareholders may have secondary liability for any of our obligations if:



| |  | we become insolvent or bankrupt due to their actions or their failure to act; and
| | - | ---------------------------------------------------------------------------------



| |  | they have the ability to make decisions for us pursuant to their ownership interest, the terms of a contract between us and them, or in any other way.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------



134



---

##### Table of Contents

Board of Directors



Pursuant to our charter, our board of directors consists of nine directors, each of whom shall be elected for a one-year term. The directors in their
entirety may be removed at any time and without cause by at least a majority vote of shareholders present at a shareholder meeting.



In accordance with the Russian Federal Law on Joint Stock Companies, the board of directors may decide any issue that does not require a shareholder vote.
Pursuant to our charter, meetings of the board of directors require the presence of at least two-thirds of its members, including at least one member nominated by each shareholder owning at least 25.0% plus one of our voting shares. The charter
provides that actions taken by the board of directors require the affirmative vote of at least a majority of its members unless otherwise specified in the charter, the procedural regulations of the board of directors or applicable law. However, the
procedural regulations of the board of directors may not reduce the voting requirements specified in the charter or applicable law. The following decisions require the affirmative vote of at least two-thirds of the directors present at a meeting of
the board of directors:



| |  | recommending annual dividends to be paid on our common stock; and
| | - | -----------------------------------------------------------------



| |  | approving the procedure for paying annual dividends on our common stock and preferred stock.
| | - | --------------------------------------------------------------------------------------------



The following decisions require the affirmative vote of at least 80.0% of all members of the board of directors:



| |  | approving, amending or terminating our internal documents, except for those documents that must be approved by the shareholders at a shareholder meeting;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | acquiring or selling shareholdings in other enterprises;
| | - | --------------------------------------------------------



| |  | approving the annual budget and the business plan, which must include the cost of new lines of business, and any amendments thereto;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| |  | approving any agreements beyond the limits of the approved budget and business plan; and
| | - | ----------------------------------------------------------------------------------------



| |  | appointing and dismissing the President and Chief Executive Officer.
| | - | --------------------------------------------------------------------



Under the Russian Federal Law on Joint Stock Companies, a unanimous vote of all members of the board of directors is required to effect the registration
of a charter amendment to reflect any increase of the charter capital.



Interested Party Transactions



We are required
by Russian law and our charter to obtain the approval of disinterested directors or our shareholders for certain transactions with interested parties. Interested parties are defined by Russian law and include, generally, any persons able
to issue mandatory instructions to us, members of our board of directors, our President and Chief Executive Officer, and any shareholder that owns (together with any affiliates) at least 20.0% of our voting shares, if such person or such
persons relatives or affiliates are:



| |  | a party to, or beneficiary of, a transaction with us, whether directly or as a representative or an intermediary;
| | - | -----------------------------------------------------------------------------------------------------------------



| |  | the owner of at least 20.0% of the issued and outstanding voting shares of a legal entity that is a party to, or beneficiary of, the transaction with us, whether directly or as a
representative or an intermediary; or
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | a member of the board of directors or an officer of a legal entity that is a party to, or beneficiary of, a transaction with us, whether directly or as a representative or an
intermediary.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Due to the technical requirements
of Russian law, these same parties may also be deemed to be interested parties with respect to certain transactions within our group and, therefore, certain transactions between companies within our group require interested party
transaction approval.



135



---

##### Table of Contents

Because we have more than 1,000 shareholders, the Russian Federal Law on Joint Stock Companies requires
that interested party transactions be approved:



| |  | by at least a majority vote of all directors who are not interested in the transaction on these issues, excluding our President and Chief Executive Officer; or
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | by at least a majority vote of shareholders who are not interested in the transaction (i.e., by more than 50.0% of the votes held by all disinterested
shareholders) if:
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the value of the transaction is equal to 2.0% or more of the book value of our assets (calculated in accordance with Russian accounting standards);
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  | the transaction involves the issuance of voting shares or securities convertible into voting shares in an amount exceeding 2.0% of our voting shares; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | all members of the board of directors are not eligible to vote.
| | - | ---------------------------------------------------------------



Major Transactions



We are required by Russian law and our charter to obtain the unanimous approval of the members of the board of directors (whether or not present at the
meeting) of transactions involving property worth more than 25.0% but not more than 50.0% of the book value of our assets, calculated in accordance with Russian accounting standards. In the event that we are unable to obtain such unanimous approval,
we are required to obtain the approval of holders of at least a majority of voting shares present at a shareholder meeting. For transactions involving property worth more than 50.0% of the book value of our assets, calculated in accordance with
Russian accounting standards, we are required to obtain the approval of holders of at least three-quarters of the voting shares present at a shareholder meeting.



Liquidation Rights



Under Russian law, the liquidation of a company results in its termination without the transfer of rights and obligations to other persons as legal
successors. Pursuant to our charter, we may be liquidated:



| |  | by the affirmative vote of holders of at least three-quarters of the voting shares present at a shareholder meeting;
| | - | --------------------------------------------------------------------------------------------------------------------



| |  | by court order; or
| | - | ------------------



| |  | on other grounds provided by legislation.
| | - | -----------------------------------------



Once the decision to liquidate has been taken, the right to manage our affairs passes to a liquidation commission. In the case of a voluntary liquidation,
the members of the liquidation commission are appointed by shareholders at a shareholder meeting. In the case of an involuntary liquidation, the members of the liquidation commission are appointed by a court. Creditors may file claims within a
period to be determined by the liquidation commission. This period shall be at least two months from the date of publication of a notice by the liquidation commission.



Pursuant to the Russian Civil Code, upon a liquidation, the claims of our creditors will be satisfied in the following order
of priority:



| |  | individuals to whom we owe funds due to harm to health or life;
| | - | ---------------------------------------------------------------



| |  | employees;
| | - | ----------



| |  | secured creditors;
| | - | ------------------



| |  | payments to the budget and non-budgetary funds; and
| | - | ---------------------------------------------------



| |  | other creditors.
| | - | ----------------



136



---

##### Table of Contents

In addition, our remaining assets will be distributed among our shareholders in the following order of
priority:



| |  | payments to repurchase all shares from shareholders who have exercised their right to require us to repurchase their shares, as provided by Russian law, including from shareholders
that either did not participate in the vote or voted against the liquidation and have elected to have their shares repurchased;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | payments of accrued but unpaid dividends on the preferred stock and the liquidation value of the preferred stock; and
| | - | ---------------------------------------------------------------------------------------------------------------------



| |  | distribution of remaining assets among the holders of common and preferred stock on a pro rata basis.
| | - | -----------------------------------------------------------------------------------------------------



Reserve Fund



Russian law requires that each joint stock company establish a reserve fund, which may only be used to cover the companys losses, redeem the
companys bonds that have been issued under Russian law and redeem the companys shares if other funds are not available. Our charter provides for a reserve fund of 15.0% of our charter capital, to be funded by annual transfers of 5.0% of
our net profits, calculated in accordance with Russian accounting standards, until the reserve fund has reached this amount. As of December 31, 2003, we had a reserve fund of approximately 35,000 rubles, or approximately US$1,200 at the Central Bank
exchange rate on December 31, 2003.



Share Registration, Transfers
and Settlement



All of our issued shares are registered.
Russian law requires each joint stock company to maintain a shareholder register. Ownership of registered shares is evidenced by entries made in the register. In October 1996, we retained the National Registry Company, a licensed independent
registrar jointly owned by Computershare Investments (UK) Limited, Computershare Limited, the European Bank for Reconstruction and Development, the International Finance Corporation, Rosbank (a Russian bank) and Oil Investment Company NIKoil (a
Russian financial institution), to maintain our shareholder register. Under the Russian Civil Code, a shareholder may transfer his or her rights in registered shares only in the manner and to the extent prescribed by law. All transfers must be in
written form. When making entries on the register, the registrar may not require documents beyond what is required by current regulations. Any refusal to register shares in the name of the transferee or, upon request of the beneficial holder, in the
name of a nominee holder, is void and may be disputed as prescribed by law.



|C. | Material Contracts
|-- | ------------------



The following summary of our material agreements, which are filed as exhibits to this Annual Report on Form 20-F or incorporated by reference into this
Annual Report on Form 20-F, does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of these agreements.



Telecommunications Licenses



We hold GSM licenses for seven out of Russias eight super-regions: the Moscow license area, the Central and Central Black Earth license area, the
North Caucasus license area, the Northwest license area (which includes the City of St. Petersburg), the Siberian license area, the Ural license area and the Volga license area. In addition to the seven super-regional GSM licenses, we hold GSM
licenses for the following six territories, all of which are located within the seven super-regions: Kaliningrad, within the Northwest region; Samara, within the Volga region; Orenburg, within the Ural region; and Stavropol, the
Kabardino-Balkarskaya Republic and the Karachaevo-Cherkesskaya Republic, all within the North Caucasus region. These territorial GSM licenses are held through subsidiaries that VimpelCom-Region acquired in 2002 and 2003. We hold AMPS/D-AMPS licenses
for the Moscow license area and eight other geographic areas: Kaluga, Novosibirsk, Orenburg, Ryazan, Samara, Tver, Vladimir and Vologda.



137



---

##### Table of Contents

The principal terms of our GSM licenses and AMPS licenses, including the license area, issue date,
start-of-service requirement, expiration date, line capacity requirement and territorial coverage requirement are discussed in Item 4Information on the CompanyLicenses of this Annual Report on Form 20-F. We also hold GPRS
licenses and licenses to provide value added service both in the Moscow license area and in the regions. The GSM licenses for the seven super-regions, including the Moscow license area, and our GPRS and value added services licenses for the Moscow
license area and any amendments to these licenses are listed as Exhibits 4.1 through 4.18 to this Annual Report on Form 20-F.



Mergers with VimpelCom-Region and KB Impuls



On October 24, 2003, our shareholders approved the merger of VimpelCom-Region into VimpelCom. Under the terms of the merger, Telenor and Alfa Group will
receive, respectively, 3,648,141 and 7,300,680 newly-issued common shares of VimpelCom in exchange for their shares of voting capital stock of VimpelCom-Region. Upon completion of the merger, Telenor will own approximately 26.6% and 29.9%,
respectively, and Alfa Group will own approximately 32.9% and 24.5%, respectively, of VimpelComs total voting stock and common shares. On April 16, 2004, our shareholders approved amendments to our charter that will become effective upon
registration with the appropriate authority. Once these charter amendments are registered and certain ancillary steps taken (including the issuance of shares to Telenor and Alfa Group, and exclusion of VimpelCom-Region from the state register of
legal entities), the merger of VimpelCom-Region into VimpelCom will be complete. We plan to register the charter amendment either when the licenses, frequencies and other permissions held by VimpelCom-Region are reissued to VimpelCom or when we
receive assurance from the appropriate regulatory authority that they will be reissued to VimpelCom following the merger of VimpelCom-Region into VimpelCom. The current legal and regulatory regime is unclear about the timing and procedure of such
transfer or reissuance in the event of a merger and we cannot assure you that we will be able to complete the merger.



On March 24, 2004, our board of directors recommended to our shareholders to approve the merger of our wholly-owned subsidiary, KB Impuls, into VimpelCom.
KB Impuls holds our groups GSM-900/1800 license and other related licenses, frequencies and permissions for the City of Moscow and the Moscow region. Our shareholders will vote on the merger at the annual general meeting of shareholders to be
held on May 26, 2004. The merger of KB Impuls into VimpelCom is subject to various Russian regulatory approvals and the satisfaction of certain other conditions precedent, including the transfer or reissuance of the telecommunications licenses,
frequencies and other permissions held by KB Impuls to VimpelCom.



For a description of some of the risks associated with the completion of the mergers of VimpelCom-Region and KB Impuls into our company and the corresponding transfer of licenses, frequencies and other permissions, please refer to the
section of the Annual Report on Form 20-F entitled Item 3Key InformationD. Risk FactorsRisks Related to Our BusinessIf we are unable to complete our mergers with VimpelCom-Region and KB Impuls or some or all of
VimpelCom-Regions and KB Impulss licenses, frequencies and other permissions are not transferred or reissued to us during the merger process, our business may be materially adversely affected.



Alcatel Vendor Financing Agreements



Our subsidiary, KB Impuls, has entered into a number of vendor financing
agreements with Alcatel for the purchase of GSM-900/1800 network infrastructure equipment and services. We have guaranteed the payment under all of KB Impulss agreements with Alcatel. The principal terms of our agreements with Alcatel are
discussed in more detail in this Annual Report on Form 20-F in Item 5Operating and Financial Review and ProspectsLiquidity and Capital Resources. Our agreements with Alcatel and certain amendments to these agreements are
listed as Exhibits 4.19 through 4.46 to this Annual Report on Form 20-F.



Sberbank Credit Lines



In December 2002,
Sberbank provided VimpelCom-Region with a five year secured credit line of US$70 million. In 2002, VimpelCom-Region drew down US$39.4 million and, as of March 27, 2003, VimpelCom-Region had drawn down the full amount of the credit line. The credit
line currently bears interest at a rate of



138



---

##### Table of Contents

8.5% per annum, which may change if certain events occur, such as a change in Russian law or a change in the interest rate of the Central Bank of Russia. The
credit line will be repaid on a quarterly basis commencing in November 2004, with the last repayment scheduled for August 2007. The principal terms of VimpelCom-Regions Sberbank credit line are discussed in more detail in this Annual Report on
Form 20-F in Item 5Operating and Financial Review and ProspectsLiquidity and Capital Resources. The agreement governing VimpelCom-Regions Sberbank credit line, our guaranty of this credit line and an amendment of our
guaranty are listed as Exhibits 4.51 through 4.52.1 to this Annual Report on Form 20-F.



In April 2004, Sberbank provided our company with a five-year U.S. dollar-denominated secured non-revolving credit line of US$130.0 million. The credit line bears interest at the rate of 8.5% per annum, which may
change upon the occurrence of certain events, such as a change in Russian law or a change in the interest rate of the Central Bank of Russia. The credit line is repayable in eight equal quarterly installments over a two-year period, beginning on
February 27, 2007 and ending April 14, 2009. To date, we have not drawn down any amount under this facility. The end of the drawdown period under the credit line falls on April 15, 2005. The credit line will be secured by a pledge of
telecommunications equipment, shares in certain of our directly and indirectly owned subsidiaries and real estate. Our companys ability to draw upon the credit line is conditioned upon our companys ability to pledge assets with a value
sufficient to fully secure the borrowings under the credit line. The proceeds of the credit line may be used to finance the expansion of our business. The credit line with Sberbank contains certain restrictive covenants that, among other things,
limit borrowings by our company and certain of our subsidiaries and requires that a specified amount of our companys aggregate credit turnover (as defined in the relevant documentation) be through Sberbank. The credit line also contains a
financial covenant requiring that our companys ratio of interest expense to OIBDA on a consolidated basis not exceed 3.0. The agreement governing VimpelComs Sberbank credit line is listed as Exhibit 4.50 to this Annual Report on Form
20-F.



Bayerische/Nordea Credit Line



In January 2003, we entered into a non-revolving credit line
agreement with Bayerische Hypo- und Vereinsbank AG and Nordea Bank Sweden AB (publ) with a credit limit of US$35.7 million. The credit line may only be used to finance the acquisition of Ericsson telecommunications equipment. The credit line bears
interest at the rate of six-month LIBOR plus 0.7%, which is payable semi-annually. Each of the three tranches under the credit line is repayable in six equal instalments, over a three-year period, which commences approximately four months prior to
December 30, 2003, the date when delivery of the equipment that we purchased is completed. The principal terms of our agreement with Bayerische and Nordea are discussed in more detail in this Annual Report on Form 20-F in Item 5Operating
and Financial Review and ProspectsLiquidity and Capital Resources. Our agreement with Bayerische and Nordea is listed as Exhibit 4.53 to this Annual Report on Form 20-F.



Svenska Handelsbanken AB (publ) Credit Line



In February 2004, VimpelCom-Region entered into a non-revolving credit agreement with Svenska Handelsbanken AB (publ) with a credit limit of US$69.7
million. The credit line bears interest at the rate of six-month LIBOR plus 0.325%, which is payable semi-annually. The credit line is repayable in fourteen equal semi-annual installments over a seven-year period. Repayment commences not later than
November 20, 2004. The end of the delivery period for the purchased equipment falls on October 20, 2004. The credit line is secured by a pledge of the telecommunications equipment acquired from Ericsson, a guarantee from the Swedish Export Credit
Agency EKN and a guarantee from our company for 20.0% of the outstanding indebtedness under the loan. In addition to interest payments, VimpelCom-Region is obligated to pay EKN a fee in the amount of 9.82% of the total commitment under
this loan. The credit line may only be used to finance the acquisition of Ericsson telecommunications equipment and to refinance the EKN Premium. VimpelCom-Regions credit agreement with Svenska Handelsbanken AB (publ) contains certain
covenants that, among other things, limit VimpelCom-Regions ability to grant loans (with certain exceptions) and repay its debt to our company (the minimal level of indebtedness to our company is set at $110.0 million). In addition, these
covenants limit VimpelCom-Regions ability to effect a merger of VimpelCom-Region with other entities outside our group of companies. However, VimpelCom-Region is



139



---

##### Table of Contents

permitted to prepay at interest payment dates any amounts outstanding under this loan. VimpelCom and Svenska Handelsbanken AB (publ) will amend and restate
this credit agreement with VimpelCom as the borrower upon completion of the proposed merger of VimpelCom-Region into VimpelCom. Svenska Handelsbanken AB (publ) and VimpelCom have already negotiated the terms of this amended and restated credit
agreement. The interest rate, the repayment date and the guarantee from the EKN will remain the same. VimpelComs guarantee of VimpelCom-Regions debt as described above and the restriction on VimpelCom-Regions ability to pay debt to
VimpelCom will cease to exist under this credit facility upon amendment and restatement of the credit agreement. The agreement governing VimpelCom-Regions credit line with Svenska and our guaranty of this credit line are listed as Exhibits
4.54 and 4.55 to this Annual Report on Form 20-F.



Loan from J.P. Morgan AG



In April 2002, J.P. Morgan AG completed an offering of
10.45% Loan Participation Notes due 2005 for the sole purpose of funding a US$250 million loan to our company. The Loan Participation Notes are listed on the Luxembourg Stock Exchange and are without recourse to J.P. Morgan AG. The loan and the Loan
Participation Notes will mature in April 2005. Interest on the loan and the Loan Participation Notes is payable semi-annually at an annual rate of 10.45%. The principal terms of the loan agreement are discussed in more detail in this Annual Report
on Form 20-F in Item 5Operating and Financial Review and ProspectsLiquidity and Capital Resources. The loan agreement that we entered into with J.P. Morgan AG is listed as Exhibit 2.2 to this Annual Report on Form 20-F. The
trust deed, dated April 26, 2002, between J.P. Morgan AG and The Bank of New York, as trustee, which governs the rights of holders of the Loan Participation Notes, is listed as Exhibit 2.3 to this Annual Report on Form 20-F.



Investments by Alfa Group and Telenor



The agreements listed as Exhibit 4.48 to 4.66 to this Annual Report on Form
20-F were entered into in connection with our companys, Alfa Groups and Telenors transaction related to VimpelCom-Region. A brief summary of this transaction is provided in this Annual Report on Form 20-F in Item
4Information on the Company, Item 5Operating and Financial Review and ProspectsLiquidity and Capital Resources and Item 7Major Shareholders and Related Party TransactionsB. Related Party
TransactionsAlfa Group/Telenor Transaction. For a further description of the terms of these agreements and the full text of these agreements, see our Reports of Foreign Issuer filed under cover of Form 6-K with the SEC on June 14, 2001,
May 21, 2002 and August 28, 2003.



Acquisitions of StavTeleSot and Extel



In December 2002, VimpelCom-Region acquired from Telenor
and another shareholder 100.0% of the outstanding shares of Extel for a purchase price of approximately US$25.3 million. During 2003, VimpelCom-Region acquired through two separate transactions 100.0% of the outstanding shares of StavTeleSot, the
largest mobile telecommunications service provider in the Stavropol region, for an aggregate purchase price of approximately US$43.1 million. VimpelCom-Region acquired a total of 49.0% of these shares from Telenor. In addition, we agreed to extend a
credit line to StavTeleSot in the amount of approximately US$9.2 million in order for StavTeleSot to repay a bank loan previously guaranteed by Telenor.



For more information about these acquisitions, please see the sections of this Annual Report on Form 20-F entitled Item 5Operating and
Financial Review and ProspectsLiquidity and Capital Resources and Item 7Major Shareholders and Related Party TransactionsB. Related Party TransactionsAcquisitions from Telenor. The Extel and StavTeleSot
acquisition agreements are listed as Exhibits 4.78 and 4.79, respectively, to this Annual Report on Form 20-F.



|D. | Exchange Controls
|-- | -----------------



The ruble is generally not convertible outside of Russia and the conversion of rubles into foreign currency on the domestic market is subject to Russian
currency regulations. Russian currency regulations allow businesses



140



---

##### Table of Contents

to convert rubles into foreign currency only for certain purposes, such as dividend and interest payments, and require certain regulatory steps to be taken
before conversion. Newly adopted rules governing the conversion of rubles into foreign currency add significant uncertainty to the conversion process.



Under current Russian law, foreign investors may transfer abroad income received on investments in Russia, including interest, dividends, and proceeds
from the sale of securities, subject to compliance with applicable regulations and payment of all applicable taxes and duties. Most capital transactions with foreign currencies require transaction-specific currency licenses from the Central Bank of
Russia. Russian law generally requires a Central Bank license in order to buy or sell ruble-denominated securities in exchange for foreign currency. Specifically, an exchange of ruble-denominated securities for foreign currency between a resident
and a nonresident requires a Central Bank license. Consequently, ADS holders not resident in Russia that elect to exchange their ADSs for our common stock may not be able to sell their shares of common stock to a Russian resident in exchange for
foreign currency without first obtaining a license. The time and difficulty involved in obtaining a license has substantially limited trade in ruble-denominated securities with settlement in foreign currency between nonresidents and residents. Under
current Russian law, it is not completely clear whether a license is required for exchanges of ruble-denominated securities for foreign currency between nonresidents. Although the prevailing interpretation of the relevant law is that a license is
not required for transactions between nonresidents, in the future the Central Bank could attempt to extend the license requirements. Payments for newly-issued shares made by nonresidents in a foreign currency do not require a license. Consequently,
a Russian company is not required to obtain a license in order to sell newly-issued stock to nonresidents for foreign currency.



In order for foreign legal entities to purchase ruble-denominated securities from, and sell ruble-denominated securities to, Russian residents with
settlement in rubles, they must first establish a special ruble investment account. Therefore, foreign legal entities holding our ADSs that elect to exchange them for shares of our common stock would have to establish a ruble investment account in
order to sell shares of our common stock for rubles. Ruble investment accounts may also be used to receive other ruble deposits in connection with investments in ruble-denominated securities, such as interest or dividends. Subject to payment of all
applicable taxes and duties, rubles deposited into ruble investment accounts may be converted into foreign currency and transferred abroad. However, establishing that all applicable taxes and duties have been paid is complicated and difficult and
therefore perceived as restricting repatriation and discouraging foreign investors from trading in ruble-denominated securities with Russian residents for settlement in rubles.



A new framework currency law will take effect on June 18, 2004. This new law will empower the Russian Government and the
Central Bank to further regulate and restrict currency control matters, including operations involving foreign securities and foreign currency borrowings by Russian companies. The law is expected to significantly liberalize Russian currency controls
by abolishing the requirement to receive transaction-specific currency licenses from the Central Bank. However, certain currency operations will continue to be subject to generally applicable restrictions and requirements, such as posting reserves
with the Central Bank and authorized banks, preliminary registration of certain accounts that are opened abroad and for performing certain currency operations and conducting certain transactions through special accounts at approved Russian banks.



There are no limitations imposed by Russian law or our charter
with respect to owning, or exercising voting rights of, our common stock or ADSs that are unique to persons not resident in Russia or not citizens or legal entities of Russia.



|E. | Taxation
|-- | --------



The following discussion generally summarizes certain material United States federal and Russian income and withholding tax consequences to a beneficial
owner arising from the ownership and disposition of shares of our common stock or ADSs. The discussion which follows is based on (a) the United States Internal Revenue Code of 1986, as amended, which we refer to in this Annual Report on Form 20-F as
the Code, the Treasury



141



---

##### Table of Contents

regulations promulgated thereunder, and judicial and administrative interpretations thereof, (b) Russian law and (c) the Convention between the United States
of America and the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, which we refer to in this Annual Report on Form 20-F as the U.S./Russia Double Tax Treaty,
all as in effect on the date hereof, and is subject to any changes (possibly on a retroactive basis) in these or other laws occurring after such date. It is also based, in part, on representations of the depositary, and assumes that each obligation
in the deposit agreement and any related agreements will be performed in accordance with its terms.



The discussion which follows is intended as a descriptive summary only and is not intended as tax advice to any particular investor. It is also not a
complete analysis or listing of all potential United States federal or Russian income and withholding tax consequences to a prospective holder of ADSs or shares of common stock. Each prospective investor is urged to consult its own tax adviser
regarding the specific United States federal, state, and local and Russian tax consequences of the ownership and disposition of the ADSs or shares of common stock.



Russian Tax Considerations



The following is a summary of certain Russian tax considerations regarding the purchase, ownership and disposition of the ADSs and shares of common stock.
The summary is general in nature and is based on the laws of the Russian Federation in effect as at the date of this filing. The summary does not seek to address the applicability of any double tax treaty relief. In this regard, however, it is noted
that there may be practical difficulties involved in claiming double tax treaty relief. Investors should consult their tax advisors with respect to the consequences of an investment in the ADSs and shares of common stock arising under the
legislation of the Russian Federation or any political subdivision thereof. Please see Item 3Key InformationB. Risk FactorsRisks Related to the Legal and Regulatory Envirnoment in RussiaRussias unpredictable
federal and local tax systems give rise to significant uncertainties and risks that complicate our tax planning and business decisions. Under no circumstances should the descriptions set forth below be viewed as tax advice.



For the purposes of this filing, a Non-Resident Holder means: (i) a physical
person, present in the Russian Federation for less than 183 days in a given calendar year or (ii) a legal person or entity not incorporated or otherwise organized in the Russian Federation (with no tax registration in Russia), which holds and
disposes of ADSs or common stock other than through a permanent establishment in Russia.



The Russian tax rules applicable to securities, and in particular to the tax treatment of a Non-Resident Holder which holds Russian securities, are characterized by significant uncertainties and by an absence of
interpretative guidance. Russian tax law and procedures are not well developed and rules are sometimes interpreted differently by different tax inspectors. In addition, both the substantive provisions of Russian tax law and the interpretation and
application of those provisions by the Russian tax authorities may be subject to more rapid and unpredictable change than in a jurisdiction with more developed capital markets. In this regard, the Russian tax authorities have not provided any
guidance regarding the treatment of ADS arrangements.



Taxation of dividends



Dividends paid to a
Non-Resident Holder generally will be subject to Russian withholding tax, which will be withheld by us, at a 15.0% rate for legal entities, and at a 30.0% rate for individuals. This tax may be reduced under the terms of a double tax treaty between
Russia and the country of residence of the Non-Resident Holder. For example, the U.S./Russia Double Tax Treaty provides for reduced rates of withholding on dividends paid to holders that are U.S. Holders (as defined below) that are entitled to
U.S./Russia Double Tax Treaty benefits; a 10.0% rate applies to dividends paid to U.S. Holders that are legal entities owning less than 10.0% of the entitys outstanding shares and 5.0% for U.S. Holders that are legal entities owning 10.0% or
more of the entitys outstanding shares. See Procedure for obtaining double tax treaty relief.



142



---

##### Table of Contents

Taxation of capital gains



A Non-Resident Holder generally may be subject to Russian income tax in connection with the sale, exchange or other
disposition of ADSs. However, there is no mechanism for withholding Russian income tax if ADSs are sold outside of Russia, provided that the ADSs are not sold to a Russian resident. Regardless of the residence of the purchaser, from January 1, 2002,
a Non-Resident Holder that is a legal entity should not be subject to any Russian income or withholding taxes in connection with the sale, exchange or other disposition of ADSs if our assets consist of 50.0% or less of immovable property or if the
ADSs are sold via foreign exchanges where they are legally circulated.



With the exception of the above, sales or other dispositions of ADSs to Russian residents are, in general, subject to Russian withholding tax. In the event of such a sale by a Non-Resident Holder that is a legal entity, a Russian resident
purchaser that is a legal entity will be required to withhold 24.0% of any gain realized on the sale by the foreign legal entity. The gain will be determined as the difference between the sale price and all expenses relating to the acquisition,
holding and alienation of ADSs paid by the Holder for the ADSs, provided that the Non-Resident Holder is able to present documents confirming such expenses. If a Non-Resident Holder is not able to present documents confirming expenses related to the
acquisition, a Russian resident purchaser that is a legal entity will be required to withhold 20.0% of the sales proceeds. There is no mechanism for a Russian resident purchaser to withhold tax if the purchaser is an individual.



Income received by a Non-Resident Holder who is a physical person from the
sale of ADSs to Russian residents is treated as Russian source income which is subject to a 30.0% rate. The individual must recognize income as the difference between sale proceeds and the actual documented expenses of the acquisition, holding and
alienation of ADSs. Where the expenses are not documented and cannot be confirmed, full sale proceeds are subject to tax. The tax must be collected by the Russian agent via a withholding procedure. There is no mechanism for a Russian resident
purchaser to withhold tax if the purchaser is an individual.



Generally, capital gains may be subject to tax only in the country of treaty residency of the individual recipient, unless the income is sourced to the other country. U.S. tax resident Holders, for example, are entitled to an exemption from
Russian withholding tax on such disposals by virtue of the U.S./Russia Double Tax Treaty. See Procedure for obtaining double tax treaty relief.



Procedure for obtaining double tax treaty relief



The procedure for obtaining double tax treaty relief is simplified under new legislative provisions. In order to take
advantage of a double tax treaty, it is sufficient to provide the Russian tax agent (e.g., our company in the case of a payment of dividends) with confirmation of residency in a state with which Russia has concluded the relevant treaty. The
confirmation of the Non-Resident Holders residency may be issued in the form of a letter from the competent authority of the Non-Resident Holders country, containing the tax identification number of the resident (if any), the period
covered by the letter and the date of issuance. The letter should be duly signed and stamped. A U.S. Holder may obtain the appropriate certification by mailing a completed Internal Revenue Service Form 8802 to: IRS-Philadelphia Service Center,
Foreign Certification Request, P.O. Box 16347, Philadelphia, Pennsylvania 19114-0447. The procedures for obtaining certification are described in greater detail in Internal Revenue Service Publication 686 and the instructions to Form 8802. As
obtaining the required certification from the Internal Revenue Service may take at least 30 days, U.S. Holders should apply for such certification as soon as possible.



If tax treaty clearance is not obtained and tax is withheld by a Russian resident on capital gains or other amounts, a
Non-Resident Holder may apply for a tax refund by filing a package of documents with the Russian local tax inspectorate to which the withholding tax was remitted within 3 years from the withholding date for Non-Resident Holders which are legal
entities. The package should include the appropriate form (1012DT for dividend income and 1011 DT for non-dividend income), confirmations of residence of the foreign Holder, a copy of the agreement or other documents substantiating the payment of
income and documents confirming the transfer of tax



143



---

##### Table of Contents

to the budget. Under the provisions of the Tax Code, the refund of the tax should be effected within one month after the submission of the documents.
However, procedures for processing such claims have not been clearly established, and there is significant uncertainty regarding the availability and timing of such refunds.



United States Federal Income Tax Considerations



This summary of United States federal income and withholding tax consequences applies only to a U.S. Holder of ADSs or
shares of common stock that is a resident of the United States for purposes of the U.S./Russia Double Tax Treaty and is fully eligible for benefits thereunder.



As used herein, the term U.S. Holder means a beneficial owner of common stock that is not a resident of the Russian Federation for Russian tax purposes
and is: (i) a citizen or resident of the United States for United States federal income tax purposes; (ii) a corporation or partnership created or organized in or under the laws of the United States or a political subdivision thereof; (iii) an
estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons, within the
meaning of Section 7701(a)(30) of the Internal Revenue Code (U.S. persons), have authority to control all substantial decisions of the trust, or a trust in existence on August 20, 1996, which was treated as a U.S. person under the law in effect
immediately before that date which made a valid election to continue to be treated as a U.S. person under the Internal Revenue Code. The U.S./Russia Double Tax Treaty benefits discussed herein generally are not available to U.S. Holders who hold
ADSs or shares of common stock in connection with the conduct of business in the Russian Federation through a permanent establishment or the performance of personal services in the Russian Federation through a fixed base. This summary does not
discuss the treatment of such holders.



Since the United States
federal income and withholding tax treatment of a U.S. Holder may vary depending upon particular situations, certain U.S. Holders (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions, U.S. Holders
subject to the alternative minimum tax, U.S. Holders who are broker-dealers in securities, U.S. Holders that have a functional currency other than the U.S. dollar, U.S. Holders that received common stock as compensation for services, and
U.S. Holders that own, directly, indirectly or by attribution, 10.0% or more of the outstanding shares of common stock) may be subject to special rules not discussed below. In addition, this summary is generally limited to U.S. Holders who will hold
ADSs or shares of common stock as capital assets within the meaning of Section 1221 of the Internal Revenue Code and not as part of a hedging transaction, straddle or conversion transaction within the
meaning of Sections 1221, 1092 and 1258 of the Internal Revenue Code and the regulations thereunder. The discussion below also does not address the effect of any United States state or local tax law or foreign tax law on a potential investor in the
ADSs or shares of common stock.



For purposes of applying
United States federal income and withholding tax law, a U.S. Holder of an ADR representing ADSs will be treated as the owner of the underlying shares of common stock represented thereby.



Taxation of dividends on ADSs or shares of common stock



Subject to the discussion under the heading United States
Federal Income Tax ConsiderationsPassive Foreign Investment Company, the gross amount of any dividend received by a U.S. Holder (determined without deduction for any Russian withholding taxes) with respect to ADSs or shares of common
stock generally will be subject to taxation as foreign source dividend income to the extent such distributions are made from the current or accumulated earnings and profits of our company, as determined for U.S. federal income tax purposes. A
dividend will be included in income when received by the U.S. Holder in the case of shares of common stock or by the Depositary in the case of ADSs. A U.S. corporate holder will not be allowed a deduction for dividends received in respect of
distributions on ADSs or shares of common stock. A distribution, if any, in excess of such current and accumulated earnings and profits first will be treated as a non-taxable return of capital to the extent of the U.S. Holders basis in the
ADSs or common stock, and thereafter as a capital gain. The portion of any distribution to a U.S. Holder treated as a non-taxable return of capital will reduce such holders tax basis in such ADSs or common stock.



144



---

##### Table of Contents

If a dividend is paid in Russian rubles, the amount included in gross income by a U.S. Holder will be the
U.S. dollar value, on the date of receipt by the U.S. Holder (or by the Depositary, in the case of ADSs), of the Russian ruble amount distributed, regardless of whether the payment is actually converted into U.S. dollars. Any gain or loss resulting
from currency exchange rate fluctuations during the period from the date the dividend is included in the income of the U.S. Holder to the date the Russian rubles are converted into U.S. dollars generally will be treated as ordinary income or loss
from U.S. sources. A U.S. Holder may be required to recognize foreign currency gain or loss on the receipt of a refund of Russian withholding tax pursuant to the U.S./Russia Double Tax Treaty to the extent the U.S. dollar value of the refund on the
date of the receipt of the refund differs from the U.S. dollar value of that amount on the date of receipt of the underlying dividend.



Russian withholding tax at the 10.0% rate provided under the U.S./Russia Double Tax Treaty will be treated as a foreign income tax. Subject to generally
applicable limitations, foreign income taxes may be credited against a U.S. Holders U.S. federal income tax liability or, at the election of the U.S. Holder, may be deducted in computing taxable income. If Russian tax is withheld at a rate in
excess of the 10.0% rate provided for in the U.S./Russia Double Tax Treaty, a U.S. Holder generally will not be entitled to credit the excess amount withheld, even though the procedures for claiming refunds and the practical likelihood that refunds
will be made available in a timely fashion are uncertain.



Distributions of additional ADSs or shares of common stock to a U.S. Holder with respect to its ADSs or shares of common stock that are made as part of a pro rata distribution to all holders of ADSs and shares of common stock generally will
not be subject to United States federal income tax.



Taxation on sale or exchange of ADSs or shares of common stock



Subject to the discussion under the heading United States Federal Income Tax ConsiderationsPassive foreign investment company, the sale of ADSs or shares of common stock generally will result
in the recognition of U.S.-source gain or loss in an amount equal to the difference between the amount realized on the sale and the U.S. Holders adjusted basis in such ADSs or shares of common stock. If a U.S. holder disposes of ADSs or shares
of common stock for foreign currency, the amount realized will generally be the U.S. dollar value of the payment received, determined using the spot rate on the settlement date for the sale. Gain or loss upon the sale of ADSs or shares of common
stock will be capital gain or loss and will be long-term capital gain or loss if the ADSs or shares of common stock have been held for more than one year. Long-term capital gain realized by a non-corporate U.S. Holder with respect to ADSs or shares
of common stock will be subject to tax at a rate not in excess of 15.0%. However, special rules may apply to a redemption of common stock which may result in the proceeds of the redemption being treated as a dividend. Certain limitations exist on
the deductibility of capital losses by both corporate and individual taxpayers. If a U.S. Holder receives a currency other than the U.S. dollar (e.g., Russian rubles) upon a sale or exchange of ADSs or common stock, gain or loss, if any,
recognized on the subsequent sale, conversion or disposition of such currency will be U.S. source ordinary income or loss. However, if such currency is converted into U.S. dollars on the date received by the U.S. Holder, the U.S. Holder generally
should not be required to recognize any additional gain or loss on such conversion.



In general, under the present U.S./Russia Double Tax Treaty, gain recognized by a U.S. Holder from such a sale would not be subject to Russian income tax, provided that certain administrative formalities required
under Russian law are met. See Russian Income and Withholding Tax ConsiderationsTaxation of Capital Gains. If Russian income tax is withheld on the sale of ADSs or shares of common stock, a U.S. Holder may not be entitled to
a tax credit for the amount withheld, even though the procedures for claiming refunds and the practical likelihood that refunds will be made available in a timely fashion are uncertain.



Passive foreign investment company



In general.The foregoing discussion assumes that we are not currently, and will not be in the future, classified as
a passive foreign investment company, which we refer to in this Annual Report on Form 20-F as a PFIC, within the meaning of the Internal Revenue Code. Generally, if during any taxable year of a non-U.S. corporation, 75.0% or more of such non-U.S.
corporations gross income consists of certain kinds of passive



145



---

##### Table of Contents

income, or if 50.0% or more of the average value (or if the non-U.S. corporation so elects, the average adjusted basis) during a taxable year of such
non-U.S. corporations assets are passive assets (generally assets that generate passive income), such non-U.S. corporation will be classified as a PFIC for such year.



Based on our current and projected income, assets and activities, we do not believe that we will be classified as a PFIC for
our current or any succeeding taxable year. However, because PFIC status is a factual matter that must be determined annually, there are no assurances in this regard.



Consequences of PFIC classification.If we were classified as a PFIC for any taxable year in which a U.S. Holder is a
holder of ADSs or common stock, such holder would be subject to special rules, generally resulting in increased tax liability in respect of gain realized on the sale or other disposition of ADSs or common stock or upon the receipt of certain
distributions on ADSs or common stock. For example, gain recognized on disposition of PFIC stock or the receipt of an excess distribution from a PFIC is: (1) treated as if it were ordinary income earned ratably on each day in the
taxpayers holding period for the stock at the highest marginal rate in effect during the period in which it was deemed earned and (2) subject to an interest charge as if the resulting tax had actually been due in such earlier year or years. An
excess distribution is the amount of any distribution received by a U.S. Holder during the taxable year that exceeds 125.0% of the immediately preceding three year average of distributions received from the corporation, subject to
certain adjustments.



A disposition is defined to include,
subject to certain exceptions, any transaction or event that constitutes an actual or deemed transfer of property for any purpose under the Internal Revenue Code, including a sale, exchange, gift, transfer at death, and the pledging of PFIC stock to
secure a loan. The foregoing rules will continue to apply with respect to a U.S. Holder who held the common stock while we met the definition of a PFIC even if we cease to meet the definition of a PFIC. You are urged to consult your own tax advisors
regarding the consequences of an investment in a PFIC.



QEF
Election.A U.S. Holder of a PFIC who makes a Qualified Electing Fund election, or a QEF Election, will be taxable currently on its pro rata share of the PFICs ordinary earnings and net capital gain, unless it makes a further election to
defer payments of tax on amounts included in income for which no distribution has been received, subject to an interest charge. Special adjustments are provided to prevent inappropriate double taxation of amounts so included in a U.S. Holders
income upon a subsequent distribution or disposition of the stock.



For a U.S. Holder to qualify for treatment under the QEF election, we would be required to provide certain information to the U.S. Holder. Although we have not definitively decided whether we would provide such information, we do not
currently intend to do so.



Mark to market election.A
U.S. Holder of marketable stock under the PFIC rules may be able to avoid the imposition of the special tax and interest charge by making a mark-to-market election. Generally, pursuant to this election, a U.S. Holder would
include in ordinary income, for each taxable year during which such stock is held, an amount equal to the increase in value of the stock, which increase will be determined by reference to the value of such stock at the end of the current taxable
year as compared with its value as of the end of the prior taxable year. A U.S. Holder desiring to make the mark-to-market election should consult its tax advisor with respect to the application and effect of making such election.



United States information reporting and backup withholding



Distributions made on ADSs or shares of common stock and proceeds from
the sale of common stock or ADSs that are paid within the United States or through certain U.S.-related financial intermediaries to a U.S. Holder are subject to information reporting and may be subject to a backup withholding tax unless,
in general, the U.S. Holder complies with certain procedures or is a corporation or other person exempt from such withholding. A holder that is not a U.S. person generally is not subject to information reporting or backup withholding tax, but may be
required to comply with applicable certification procedures to establish that he is not a U.S. person in order to avoid the application of such information reporting requirements or backup withholding tax to payments received within the United
States or through certain U.S.-related financial intermediaries.



146



---

##### Table of Contents

|F. | Dividends and Paying Agents
|-- | ---------------------------



Not required.



|G. | Statement by Experts
|-- | --------------------



Not required.



|H. | Documents on Display
|-- | --------------------



We file and submit reports and other information with the SEC. Any documents that we file and submit with the SEC may be read and copied at the SECs
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. We file our annual reports on Form 20-F and submit our quarterly results and other current reports on Form 6-K.



|I. | Subsidiary Information
|-- | ----------------------



Not required.



|ITEM 11. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------



Qualitative and Quantitative Disclosures About Market Risk



We are exposed to market risk from adverse movements in foreign currency exchange rates and changes in interest rates on our
obligations. In accordance with our policy, we do not enter into any treasury management transactions of a speculative nature.



The Russian ruble is generally non-convertible outside Russia, so our ability to hedge against further devaluation by converting to other currencies is
limited. Further, our ability to convert Russian rubles into other currencies in Russia is subject to rules that restrict the purposes for which conversion and payments of foreign currencies are allowed. To the extent it is permitted under Russian
regulations, we keep our cash and cash equivalents in interest bearing accounts, in U.S. dollars and Euros, in order to manage against the risk of Russian ruble devaluation. We maintain bank accounts denominated in Russian rubles, U.S. dollars and
Euros. Although we attempt to match revenue and cost in terms of their respective currencies, we may experience economic loss and a negative impact on earnings as a result of foreign currency exchange rate fluctuations. Under Russian profit tax
rules, maintaining cash balances denominated in any foreign currency creates taxable translation gains.



Given that much of our capital expenditures and operating costs are indexed to, or denominated in, U.S. dollars, including service costs, employee
compensation expenses and interest expenses, we have taken specific steps to minimize our exposure to fluctuations in the Russian ruble. Although Russian currency control regulations require us to collect virtually all of our revenues in Russian
rubles, we price and invoice in U.S. dollars and index our invoices and collections to the applicable U.S. dollar exchange rates. The average period of bank transfer from our customers bank accounts to our bank accounts is one business day.
Our average daily cash receipts (including roaming) exceed the Russian ruble equivalent of US$5.3 million. This amount represents an exposure to changes in the exchange rate of the Russian ruble in respect of money in transit. In addition we have
Russian ruble exposure from our VAT recoverable balance which is denominated in Russian rubles and may depreciate over time.



Most of our equipment financing obligations are denominated in Euros, which exposes us to risks associated with the changes in Euro exchange rates. Our
treasury function has developed risk management policies that establish guidelines for limiting foreign currency exchange rate risk. In May 2002, we entered into a forward



147



---

##### Table of Contents

agreement with Citibank providing for the purchase, in November 2002, of 5.0 million at a rate of 0.897 per U.S. dollar. In August 2002, our
subsidiary KB Impuls entered into a forward agreement with Citibank providing for the purchase of 89.9 million in U.S. dollars at a rate of 0.9599 per U.S. dollar in several installments during the period from January 2003 to January
2006. In accordance with the agreement dated August 2002, KB Impuls made a prepayment to Citibank in the amount of US$8.0 million, which was returned in full in September 2003. As of December 31, 2003, the fair value of the forward agreement between
KB Impuls and Citibank was US$14.0 million. During 2003, we entered into forward agreements with Standard Bank. As of December 31, 2003, the fair value of our forward agreements with Standard Bank was US$1.5 million. We have entered into the
above-mentioned agreements to hedge our foreign currency risk associated with our equipment financing obligations denominated in Euros.



The following table summarizes information about the maturity of our financial instruments that are sensitive to foreign currency exchange rates,
including foreign currency denominated debt obligations. Fair value at December 31, 2003 approximates total value.



|                                                                                                   |  |                               |  |                 |  |               |  |      |  |      |  |            |  |         |  |     
|-------------------------------------------------------------------------------------------------- |  | ----------------------------- |  | --------------- |  | ------------- |  | ---- |  | ---- |  | ---------- |  | ------- |  | ----
|                                                                                                   |  | Years Ended December 31,      |  | At Dec. 31,2002 |  | AtDec. 312002
|                                                                                                   |  | 2004                          |  | 2005            |  | 2006          |  | 2007 |  | 2008 |  | Thereafter |  |        
|                                                                                                   |  | (In millions of U.S. dollars) |  |                 |  |              
|Assets                                                                                             |  |                               |  |                 |  |               |  |      |  |      |  |            |  |         |  |     
|Cash and cash equivalents                                                                          |  |                               |  |                 |  |               |  |      |  |      |  |            |  |         |  |     
|Russian rubles                                                                                     |  | 68.0                          |  |                |  |              |  |     |  |     |  |           |  | 68.0    |  | 40.2
|Euros and other currencies                                                                         |  | 27.5                          |  |                |  |              |  |     |  |     |  |           |  | 27.5    |  | 40.7
|Liabilities                                                                                        |  |                               |  |                 |  |               |  |      |  |      |  |            |  |         |  |     
|Euro-denominated long-term debt, including current portion                                         |  |                               |  |                 |  |               |  |      |  |      |  |            |  |         |  |     
|Variable rate (six-month EURIBOR plus 2.9%)                                                        |  | 34.8                          |  | 31.5            |  | 4.7           |  |     |  |     |  |           |  | 71.0    |  | 84.1
|Variable rate (six-month EURIBOR plus 3.5%)                                                        |  | 20.2                          |  | 3.3             |  |              |  |     |  |     |  |           |  | 23.5    |  | 40.8
|Fixed rate (10.0%)                                                                                 |  | 11.6                          |  | 7.8             |  | 2.2           |  |     |  |     |  |           |  | 21.6    |  | 15.0
|Fixed rate (0.0%)                                                                                  |  | 1.2                           |  | 1.5             |  |              |  |     |  |     |  |           |  | 2.7     |  |    
|Ruble-denominated long-term debt, including current portion                                        |  |                               |  |                 |  |               |  |      |  |      |  |            |  |         |  |     
|Fixed rate (4.0%-21.0%)                                                                            |  | 104.1                         |  |                |  |              |  |     |  |     |  |           |  | 104.1   |  | 4.4 
|Central Bank of Russia:                                                                            |  |                               |  |                 |  |               |  |      |  |      |  |            |  |         |  |     
|US$/Russian ruble exchange rate                                                                    |  |                              |  |                |  |              |  |     |  |     |  |           |  | 29.4545 |  |    
|Central Bank of Russia:                                                                            |  |                               |  |                 |  |               |  |      |  |      |  |            |  |         |  |     
|Euro/US$ cross rate                                                                                |  |                              |  |                |  |              |  |     |  |     |  |           |  | 1.2502  |  |    
|Forward agreement to purchase Euro for U.S. dollars at a fixed rate of EURO 1.1526 per U.S. dollar |  | 5.76                          |  | 5.53            |  |              |  |     |  |     |  |           |  | 11.3    |  |    
|Forward agreement to purchase Euro for U.S. dollars at a fixed rate of EURO 1.1455 per U.S. dollar |  | 1.0                           |  | 1.4             |  |              |  |     |  |     |  |           |  | 2.4     |  |    
|Forward agreement to purchase Euro for U.S. dollars at a fixed rate of EURO 1.1461 per U.S. dollar |  | 1.6                           |  | 0.8             |  |              |  |     |  |     |  |           |  | 2.4     |  |    
|Forward agreement to purchase Euro for U.S. dollars at a fixed rate of EURO 0.9599 per U.S. dollar |  | 33.0                          |  | 16.3            |  | 0.3           |  |     |  |     |  |           |  | 49.6    |  | 86.3



Our vendor financing
agreements with Alcatel and our credit line with Nordea Bank bear interest at rates ranging from EURIBOR plus 2.9% to EURIBOR plus 3.5% and LIBOR plus 0.7%. As of December 31, 2003, approximately US$123.7 million (including US$94.3 million
denominated in Euros) of our outstanding indebtedness bore interest at variable rates compared to US$197.4 million (including US$145.6 million denominated in Euros) as of December 31, 2002. As of December 31, 2003, approximately US$2.7 million of
our vendor financing agreements bore zero interest rate. We are also obliged to pay the Swedish Export Credit Agency a guarantee fee in the amount of 5.03% of the relevant tranche before our first draw down under each tranche of our credit agreement
with Nordea Bank.



148



---

##### Table of Contents

The interest rate under the Sberbank credit lines for both our company and VimpelCom-Region may change
upon the occurrence of certain events. This potential change in the interest rate is not directly linked to the change in market interest rates. The following table provides information about the maturity of our debt obligations as of December 31,
2003, which are potentially subject to changes in interest rates.



|                                                                                                                                 |  |                               |   |                    |       |                    |  |      |   |  |      |   |  |      |  |            |  |       |  |      
|-------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | - | ------------------ | ----- | ------------------ |  | ---- | - |  | ---- | - |  | ---- |  | ---------- |  | ----- |  | -----
|                                                                                                                                 |  | Years Ended December 31,      |   | AtDec.31,2003Total |       | AtDec.31,2002Total
|                                                                                                                                 |  | 2004                          |   |                    | 2005  |                    |  | 2006 |   |  | 2007 |   |  | 2008 |  | Thereafter |  |      
|                                                                                                                                 |  | (In millions of U.S. dollars) |   |                    |       |                   
|Vendor financing, Euro-denominated                                                                                               |  | 11.6                          |   |                    | 7.8   |                    |  | 2.2  |   |  |     |   |  |     |  |           |  | 21.6  |  | 15.0 
|Fixed rate                                                                                                                       |  | 10.0                          | % |                    | 10.0  | %                  |  | 10.0 | % |  |     |   |  |     |  |           |  |      |  |     
|Bank loans                                                                                                                       |  |                               |   |                    |       |                    |  |      |   |  |      |   |  |      |  |            |  |       |  |      
|VimpelCom loan from J.P. Morgan AG (funded by the issuance of loan participation notes by J.P. Morgan AG), US
dollar-denominated |  |                              |   |                    | 250.0 |                    |  |     |   |  |     |   |  |     |  |           |  | 250.0 |  | 250.0
|Fixed rate                                                                                                                       |  |                              |   |                    | 10.45 | %                  |  |     |   |  |     |   |  |     |  |           |  |      |  |     
|VimpelCom loan from Sberbank, US dollar-denominated                                                                              |  | 16.7                          |   |                    |      |                    |  |     |   |  |     |   |  |     |  |           |  | 16.7  |  | 50.1 
|Fixed rate, subject to change by Sberbank                                                                                        |  | 9.5                           | % |                    |      |                    |  |     |   |  |     |   |  |     |  |           |  |      |  |     
|VimpelCom-Region loan from Sberbank, US dollar-denominated                                                                       |  | 3.5                           |   |                    | 14.0  |                    |  | 29.4 |   |  | 23.1 |   |  |     |  |           |  | 70.0  |  | 39.4 
|Fixed rate, subject to change by Sberbank                                                                                        |  | 11.5                          | % |                    | 11.5  | %                  |  | 11.5 | % |  | 11.5 | % |  |     |  |           |  |      |  |     
|Ruble-denominated bonds                                                                                                          |  | 101.9                         |   |                    |      |                    |  |     |   |  |     |   |  |     |  |           |  | 101.9 |  |     
|Fixed rate, subject to change by VimpelCom Finance following second interest payment                                             |  | 8.8                           | % |                    |      |                    |  |     |   |  |     |   |  |     |  |           |  |      |  |     
|Other loans, Russian ruble denominated (in millions of US dollars based on the Central Bank exchange rate of US$/Ruble
29.4545)  |  | 2.3                           |   |                    |      |                    |  |     |   |  |     |   |  |     |  |           |  | 2.3   |  | 2.5  
|Fixed rate                                                                                                                       |  | 4.0%-21.0                     | % |                    |      |                    |  |     |   |  |     |   |  |     |  |           |  |      |  |     
|Other loans, US dollar-denominated                                                                                               |  | 1.6                           |   |                    |      |                    |  |     |   |  |     |   |  |     |  |           |  | 1.6   |  | 1.9  
|Fixed rate                                                                                                                       |  | 12.0                          | % |                    |      |                    |  |     |   |  |     |   |  |     |  |           |  |      |  |     



Our cash and cash
equivalents are not subject to any material interest rate risk.



|ITEM 12. | Description of Securities other than Equity Securities
|-------- | ------------------------------------------------------



Not required.



149



---

##### Table of Contents

PART II



|ITEM 13. | Defaults, Dividend Arrearages and Delinquencies
|-------- | -----------------------------------------------



None.



|ITEM 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds
|-------- | ----------------------------------------------------------------------------



None.



|ITEM 15. | Controls and Procedures
|-------- | -----------------------



As of the end of the period covered by this Annual Report on Form 20-F, an evaluation was carried out under the supervision and with the participation of
our management, including our CEO and General Director and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of
achieving their control objectives, and management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures. Based upon and as of the date of the evaluation, our CEO and General Director and our Chief
Financial Officer have concluded that our disclosure controls and procedures were effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our CEO and General Director and our Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. These disclosure controls and procedures include our establishment of a Disclosure Review Committee, which operates in close coordination with our Internal Audit Department to review the
preparation of our Exchange Act reports and to provide an additional check on our disclosure controls and procedures.



There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date our
CEO and General Director and our Chief Financial Officer completed their evaluation, nor were there any significant deficiencies or material weaknesses in our internal controls requiring corrective actions.



|ITEM 16A. | Audit Committee Financial Expert
|--------- | --------------------------------



Our board of directors does not have an audit committee. We are required by Russian law and our charter to have an audit commission. See the
section of this Annual Report on Form 20-F entitled Item 6Directors, Senior Management and EmployeesC. Board Practices. Our audit commission currently consists of Alexander Gersh, Knut Giske and Nigel J. Robinson, all of whom
are financially literate, have an understanding of U.S. GAAP and are knowledgeable about the affairs of our company. As set forth in Item 6Directors, Senior Management and Employees, Mr. Gersh is currently the Chief Financial
Officer of FLAG Telecom, Mr. Giske is currently the Vice President of Finance of Telenor Mobile and Mr. Robinson is currently the Director of Corporate Finance and Control of the Alfa Group. The board of directors will determinine whether one or
more of these audit commission members is a financial expert, as defined in Item 16A of Form 20-F. Once it has made a determination, it will disclose that fact in the manner required by the rules and regulations of the SEC.



|ITEM 16B. | Code of Ethics
|--------- | --------------



We have adopted a code of ethics, as defined in Item 16B of Form 20-F under the Exchange Act, which applies to employees, officers and directors of our
company. Our code of ethics is available on our web site at http://www.vimpelcom.ru. We will disclose any amendment to the provisions of such code of ethics or any waiver that our board of directors may grant on our web site at the same
address.



150



---

##### Table of Contents

|ITEM 16C. | Principal Accountant Fees and Services
|--------- | --------------------------------------



Ernst & Young (CIS) Limited has served as our independent public accountants for each of the fiscal years in the two-year period ended December 31,
2003, for which audited financial statements appear in this



Annual Report on
Form 20-F. The following table presents the aggregate fees for professional services and other services rendered by Ernst & Young (CIS) Limited in 2003 and 2002, respectively.



|                   |  |                                |         |      |     |        
|------------------ |  | ------------------------------ | ------- | ---- | --- | -------
|                   |  | Year ended December 31,       
|                   |  | 2003                           |         | 2002
|                   |  | (in thousands of U.S. dollars)
|Audit Fees         |  | US$                            | 296,000 |      | US$ | 395,000
|Audit-Related Fees |  | US$                            | 246,000 |      | US$ | 337,000
|Tax Fees           |  | US$                            | 16,000  |      | US$ | 102,000
|All Other Fees     |  | US$                            | 150,000 |      | US$ | 160,000
|Total              |  | US$                            | 708,000 |      | US$ | 994,000



Audit services.



Audit services mainly consisted of the audit
of the consolidated financial statements as of and for the years ended December 31, 2003 and 2002.



Audit-related services.



Audit-related services mainly consisted of services which are normally performed by the external auditor in connection with the audit of our
financial statements, advisory services regarding specific regulatory filings and reporting procedures, reviews of VimpelComs consolidated quarterly financial statements, reviews of VimpelCom-Regions consolidated quarterly financial
statements and other agreed-upon services related to accounting and billing records.



Tax services.



Tax services mainly consisted of tax advice related to issues of Russian statutory taxation.



Other services.



Other services mainly consisted of technology security risk services and training services.



Audit Committee Pre-Approval Policies and Procedures



The Sarbanes-Oxley Act of 2002 required the company to implement a
pre-approval process for all engagements with its independent public accountants. In compliance with Sarbanes-Oxley requirements pertaining to auditor independence, the companys audit commission pre-approves the engagement terms and fees of
Ernst & Young (CIS) Limited for all audit and non-audit services, including tax services, unless such pre-approval is not required under the Sarbanes-Oxley Act. The companys audit commission pre-approved the engagement terms and fees of
Ernst & Young (CIS) Limited for all services performed for the fiscal year ended December 31, 2003.



|ITEM 16D. | Exemptions from the Listing Standards for Audit Committees
|--------- | ----------------------------------------------------------



Not required.



|ITEM 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers
|--------- | ----------------------------------------------------------------------



Not required.



151



---

##### Table of Contents

PART III



|ITEM 17. | Financial Statements
|-------- | --------------------



We have responded to Item 18 in lieu of this Item.



|ITEM 18. | Financial Statements
|-------- | --------------------



INDEX TO FINANCIAL STATEMENTS

OF
OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



|                                                |  |    
|----------------------------------------------- |  | ---
|Report of Independent Auditors                  |  | F-2
|Consolidated Financial Statements               |  | F-3
|Consolidated Balance Sheets                     |  | F-3
|Consolidated Statements of Income               |  | F-4
|Consolidated Statements of Shareholders Equity |  | F-5
|Consolidated Statements of Cash Flows           |  | F-6
|Notes to Consolidated Financial Statements      |  | F-7





|ITEM 19. | Exhibits
|-------- | --------



List of Exhibits.



|            |  |                                                                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                               
|1.1         |  | Charter of VimpelCom.+###                                                                                                                                 
|            | 
|1.1.1       |  | Amendment No. 1 to the Charter of VimpelCom, dated March 3, 2004.+^^^                                                                                     
|            | 
|2.1         |  | Deposit Agreement, dated November 20, 1996, by and among VimpelCom, The Bank of New York, as the depositary, and all owners or beneficial owners of ADRs.*
|            | 
|2.2         |  | Loan Agreement, dated April 23, 2002, by and between VimpelCom and J.P. Morgan AG.###                                                                     
|            | 
|2.3         |  | Trust Deed, dated April 26, 2002, by and between J.P. Morgan AG and The Bank of New York.###                                                              
|            | 
|4.1         |  | License No. 10005 for the territory of the Moscow License Area.+                                                                                         
|            | 
|4.1.1       |  | Amendment No. 1 to License No. 10005 for the territory of the Moscow License Area.+                                                                     
|            | 
|4.1.2       |  | Amendment No. 2 to License No. 10005 for the territory of the Moscow License Area.+                                                                    
|            | 
|4.1.3       |  | Amendment No. 3 to License No. 10005 for the territory of the Moscow License Area.+#                                                                      
|            | 
|4.1.4       |  | Amendment No. 4 to License No. 10005 for the territory of the Moscow License Area.+#                                                                      
|            | 
|4.1.5       |  | Amendment No. 5 to License No. 10005 for the territory of the Moscow License Area.+###                                                                    
|            | 
|4.2         |  | License No. 14707 for the territory of the Central and Central Black Earth License Area.+                                                              
|            | 
|4.2.1       |  | Amendment No. 1 to License No. 14707 for the territory of the Central and Central Black Earth License Area.+                                           
|            | 
|4.2.2       |  | Amendment No. 2 to License No. 14707 for the territory of the Central and Central Black Earth License Area.+#                                             



152



---

##### Table of Contents

|            |  |                                                                                                                
|----------- |  | ---------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                    
|4.2.3       |  | Amendment No. 3 to License No. 14707 for the territory of the Central and Central Black Earth License Area.+#  
|            | 
|4.2.4       |  | Amendment No. 4 to License No. 14707 for the territory of the Central and Central Black Earth License Area.+#  
|            | 
|4.2.5       |  | Amendment No. 5 to License No. 14707 for the territory of the Central and Central Black Earth License Area.+## 
|            | 
|4.2.6       |  | Amendment No. 6 to License No. 14707 for the territory of the Central and Central Black Earth License Area.+###
|            | 
|4.3         |  | License No. 14708 for the territory of the Volga License Area.+                                             
|            | 
|4.3.1       |  | Amendment No. 1 to License No. 14708 for the territory of the Volga License Area.+                          
|            | 
|4.3.2       |  | Amendment No. 2 to License No. 14708 for the territory of the Volga License Area.+#                            
|            | 
|4.3.3       |  | Amendment No. 3 to License No. 14708 for the territory of the Volga License Area.+#                            
|            | 
|4.3.4       |  | Amendment No. 4 to License No. 14708 for the territory of the Volga License Area.+#                            
|            | 
|4.3.5       |  | Amendment No. 5 to License No. 14708 for the territory of the Volga License Area.+##                           
|            | 
|4.3.6       |  | Amendment No. 6 to License No. 14708 for the territory of the Volga License Area.+###                          
|            | 
|4.4         |  | License No. 14709 for the territory of the North Caucasus License Area.+                                    
|            | 
|4.4.1       |  | Amendment No. 1 to License No. 14709 for the territory of the North Caucasus License Area.+                 
|            | 
|4.4.2       |  | Amendment No. 2 to License No. 14709 for the territory of the North Caucasus License Area.+#                   
|            | 
|4.4.3       |  | Amendment No. 3 to License No. 14709 for the territory of the North Caucasus License Area.+#                   
|            | 
|4.4.4       |  | Amendment No. 4 to License No. 14709 for the territory of the North Caucasus License Area.+#                   
|            | 
|4.4.5       |  | Amendment No. 5 to License No. 14709 for the territory of the North Caucasus License Area.+##                  
|            | 
|4.4.6       |  | Amendment No. 6 to License No. 14709 for the territory of the North Caucasus License Area.+##                  
|            | 
|4.4.7       |  | Amendment No. 7 to License No. 14709 for the territory of the North Caucasus License Area.+###                 
|            | 
|4.4.8       |  | Amendment No. 8 to License No. 14709 for the territory of the North Caucasus License Area.+###                 
|            | 
|4.4.9       |  | Amendment No. 9 to License No. 14709 for the territory of the North Caucasus License Area.+###                 
|            | 
|4.4.10      |  | Amendment No. 10 to License No. 14709 for the territory of the North Caucasus License Area.+ ^^^               
|            | 
|4.5         |  | License No. 14710 for the territory of the Siberian License Area.+                                          
|            | 
|4.5.1       |  | Amendment No. 1 to License No. 14710 for the territory of the Siberian License Area.+                       
|            | 
|4.5.2       |  | Amendment No. 2 to License No. 14710 for the territory of the Siberian License Area.+#                         
|            | 
|4.5.3       |  | Amendment No. 3 to License No. 14710 for the territory of the Siberian License Area.+#                         
|            | 
|4.5.4       |  | Amendment No. 4 to License No. 14710 for the territory of the Siberian License Area.+#                         
|            | 
|4.5.5       |  | Amendment No. 5 to License No. 14710 for the territory of the Siberian License Area.+##                        



153



---

##### Table of Contents

|            |  |                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                          
|4.5.6       |  | Amendment No. 6 to License No. 14710 for the territory of the Siberian License Area.+###                                                             
|            | 
|4.6         |  | License No. 23706 for the territory of the Northwest License Area.+###                                                                               
|            | 
|4.6.1       |  | Amendment No. 1 to License No. 23706 for the territory of the Northwest License Area.+###                                                            
|            | 
|4.7         |  | License No. 24303 for the territory of the Ural License Area.+###                                                                                    
|            | 
|4.7.1       |  | Amendment No. 1 to License No. 24303 for the territory of the Ural License Area.+###                                                                 
|            | 
|4.7.2       |  | Amendment No. 2 to License No. 24303 for the territory of the Ural License Area.+ ^^^                                                                
|            | 
|4.7.3       |  | Amendment No. 3 to License No. 24303 for the territory of the Ural License Area.+ ^^^                                                                
|            | 
|4.8         |  | License No. 17938 for the provision of data communication services for the territory of the Moscow License Area.+###                                 
|            | 
|4.8.1       |  | Amendment No. 1 to License No. 17938 for the provision of data communication services for the territory of the Moscow License Area.+###              
|            | 
|4.8.2       |  | Amendment No. 2 to License No. 17938 for the provision of data communication services for the territory of the Moscow License Area.+###              
|            | 
|4.8.3       |  | Amendment No. 3 to License No. 17938 for the provision of data communication services for the territory of the Moscow License Area.+###              
|            | 
|4.9         |  | License No. 17951 for the provision of telematic services for the territory of the Moscow License Area.+###                                          
|            | 
|4.9.1       |  | Amendment No. 1 to License No. 17951 for the provision of telematic services for the territory of the Moscow License Area.+###                       
|            | 
|4.9.2       |  | Amendment No. 2 to License No. 17951 for the provision of telematic services for the territory of the Moscow License Area.+###                       
|            | 
|4.9.3       |  | Amendment No. 3 to License No. 17951 for the provision of telematic services for the territory of the Moscow License Area.+###                       
|            | 
|4.10        |  | License No. 19979 for the lease of telecommunications channels for the territory of Moscow License Area.+ ^^^                                        
|            | 
|4.10.1      |  | Amendment No. 1 to License No. 19979 for the lease of telecommunications channels for the territory of Moscow License Area.+ ^^^                     
|            | 
|4.11        |  | License No. 25340 for the provision of telematic services for the territory of the Northwest License Area.+ ^^^                                      
|            | 
|4.12        |  | License No. 25341 for the provision of data transmission services for the territory of the Northwest License Area.+ ^^^                              
|            | 
|4.13        |  | License No. 27743 for the provision of data transmission services for the territory of the Ural License Area.+ ^^^                                   
|            | 
|4.14        |  | License No. 27744 for the provision of telematic services for the territory of Ural License Area.+ ^^^                                               
|            | 
|4.15        |  | License No. 23071 for the provision of data transmission services for multiple territories throughout the Russian Federation.+ ^^^                   
|            | 
|4.15.1      |  | Amendment No. 1 to License No. 23071 for the provision of data transmission services for multiple territories throughout the Russian Federation.+ ^^^



154



---

##### Table of Contents

|            |  |                                                                                                                                                                    
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                        
|4.15.2      |  | Amendment No. 2 to License No. 23071 for the provision of data transmission services for multiple territories throughout the Russian Federation.+ ^^^              
|            | 
|4.16        |  | License No. 23072 for the provision of telematic services for multiple territories throughout the Russian Federation.+ ^^^                                         
|            | 
|4.16.1      |  | Amendment No. 1 to License No. 23072 for the provision of telematic services for multiple territories throughout the Russian Federation.+ ^^^                      
|            | 
|4.17        |  | License No. 28733 for the lease of telecommunications channels for multiple territories throughout the Russian Federation.+ ^^^                                    
|            | 
|4.18        |  | License No. 23785 for the lease of telecommunications channels for multiple territories throughout the Russian Federation.+ ^^^                                    
|            | 
|4.19        |  | Frame Contract No. II for the Supply of Switching, Radio and Other Telecommunication Equipment, dated May 19, 2000, by and between Alcatel SEL AG and KB
Impuls.
|            | 
|4.20        |  | Indent 5 Deferred Payment Agreement, dated August 23, 2000, by and between Alcatel SEL AG and KB Impuls.#                                                          
|            | 
|4.21        |  | Deed of Guarantee, Indent 5 Deferred Payment Agreement, dated August 23, 2000, given by VimpelCom in favor of Alcatel SEL AG.#                                     
|            | 
|4.22        |  | Indent 6 Deferred Payment Agreement, dated September 7, 2000, by and between Alcatel SEL AG and KB Impuls.#                                                        
|            | 
|4.22.1      |  | First Amendment, dated January 10, 2001, to Indent 6 Deferred Payment Agreement, dated September 7, 2000, by and between Alcatel SEL AG and KB Impuls.#            
|            | 
|4.23        |  | Deed of Guarantee, Indent 6 Deferred Payment Agreement, dated September 7, 2000, given by VimpelCom in favor of Alcatel SEL AG.#                                   
|            | 
|4.24        |  | Indent 8 Deferred Payment Agreement, dated February 15, 2001, by and between Alcatel SEL AG and KB Impuls.#                                                        
|            | 
|4.25        |  | Deed of Guarantee, Indent 8 Deferred Payment Agreement, dated February 15, 2001, given by VimpelCom in favor of Alcatel SEL AG.#                                   
|            | 
|4.26        |  | Indent 9 Deferred Payment Agreement, dated May 9, 2001, by and between Alcatel SEL AG and KB Impuls.##                                                             
|            | 
|4.27        |  | Deed of Guarantee, Indent 9 Deferred Payment Agreement, dated May 9, 2001, given by VimpelCom in favor of Alcatel SEL AG.##                                        
|            | 
|4.28        |  | Indent 10 Deferred Payment Agreement, dated June 22, 2001, by and between Alcatel SEL AG and KB Impuls.##                                                          
|            | 
|4.28.1      |  | First Amendment, dated October 29, 2001, to Indent 10 Deferred Payment Agreement, dated June 22, 2001, by and between Alcatel SEL AG and KB Impuls.##              
|            | 
|4.29        |  | Deed of Guarantee, Indent 10 Deferred Payment Agreement, dated June 22, 2001, given by VimpelCom in favor of Alcatel SEL AG.##                                     
|            | 
|4.30        |  | Indent 13 Deferred Payment Agreement, dated November 5, 2001, by and between Alcatel SEL AG and KB Impuls.##                                                       
|            | 
|4.31        |  | Deed of Guarantee, Indent 13 Deferred Payment Agreement, dated November 5, 2001, given by VimpelCom in favor of Alcatel SEL AG.##                                  
|            | 
|4.32        |  | Indent 14 Deferred Payment Agreement, dated November 12, 2001, by and between Alcatel SEL AG and KB Impuls.##                                                      



155



---

##### Table of Contents

|            |  |                                                                                                                                                                
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                    
|4.33        |  | Deed of Guarantee, Indent 14 Deferred Payment Agreement, dated November 12, 2001, given by VimpelCom in favor of Alcatel SEL AG.##                             
|            | 
|4.34        |  | Indent 15 Deferred Payment Agreement, dated December 21, 2001, by and between Alcatel SEL AG and KB Impuls.##                                                  
|            | 
|4.35        |  | Deed of Guarantee, Indent 15 Deferred Payment Agreement, December 21, 2001, given by VimpelCom in favor of Alcatel SEL AG.##                                   
|            | 
|4.36        |  | Indent 16 Deferred Payment Agreement, dated December 21, 2001, by and between Alcatel SEL AG and KB Impuls.##                                                  
|            | 
|4.37        |  | Deed of Guarantee, Indent 16 Deferred Payment Agreement, dated December 21, 2001, given by VimpelCom in favor of Alcatel SEL AG.##                             
|            | 
|4.38        |  | Indent 17 Deferred Payment Agreement, dated March 27, 2002, by and between Alcatel SEL AG and KB Impuls.###                                                    
|            | 
|4.39        |  | Deed of Guarantee, Indent 17 Deferred Payment Agreement, dated March 27, 2002, given by VimpelCom in favor of Alcatel SEL AG.###                               
|            | 
|4.40        |  | Indent 18 Deferred Payment Agreement, dated April 17, 2002, by and between Alcatel SEL AG and KB Impuls.###                                                    
|            | 
|4.40.1      |  | First Amendment, dated May 28, 2002, to Indent 18 Deferred Payment Agreement, dated April 17, 2002, by and between Alcatel SEL AG and KB Impuls.###            
|            | 
|4.41        |  | Deed of Guarantee, Indent 18 Deferred Payment Agreement, dated April 17, 2002, given by VimpelCom in favor of Alcatel SEL AG.###                               
|            | 
|4.42        |  | Indent 19 Deferred Payment Agreement, dated July 11, 2002, by and between Alcatel SEL AG and KB Impuls.###                                                     
|            | 
|4.43        |  | Deed of Guarantee, Indent 19 Deferred Payment Agreement, dated July 11, 2002, given by VimpelCom in favor of Alcatel SEL AG.###                                
|            | 
|4.44        |  | Indent 20 Deferred Payment Agreement, dated August 27, 2002, by and between Alcatel SEL AG and KB Impuls.###                                                   
|            | 
|4.45        |  | Deed of Guarantee, Indent 20 Deferred Payment Agreement, dated August 27, 2002, given by VimpelCom in favor of Alcatel SEL AG.###                              
|            | 
|4.46        |  | Amendment to Deferred Payment Agreements, dated February 15, 2002, by and between Alcatel SEL AG and KB Impuls.###                                             
|            | 
|4.47        |  | Form of Indemnification Agreement.###                                                                                                                          
|            | 
|4.48        |  | General Agreement No. 1605, dated May 16, 1997, by and between KB Impuls and VimpelCom, as restated on January 30, 2004.+^^^                                   
|            | 
|4.49        |  | Service Obligation Agreement, dated April 1, 1999, by and between Telenor Russia AS and VimpelCom.***                                                          
|            | 
|4.49.1      |  | Amendment No. 1, dated February 21, 2002, to Service Obligation Agreement, dated April 1, 1998, by and between Telenor AS and VimpelCom.##                     
|            | 
|4.50        |  | Non-Revolving Credit Facility Agreement No. 9220, dated April 15, 2004, by and between Sberegatelny Bank of the Russian Federation and VimpelCom. +^^^         
|            | 
|4.51        |  | Non-Revolving Credit Facility Agreement No. 9152, dated December 17, 2002, by and between VimpelCom-Region and Sberegatelny Bank of the Russian Federation.+###



156



---

##### Table of Contents

|            |  |                                                                                                                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                       
|4.52        |  | Guarantee Agreement No. P-9152, dated December 20, 2002, by and between VimpelCom and Sberegatelny Bank of the Russian Federation.+###                                                                                            
|            | 
|4.52.1      |  | Amendment Agreement No. 1, dated March 17, 2003, to Guarantee Agreement No. P-9152, dated December 20, 2002, by and between VimpelCom and Sberegatelny Bank of the Russian
Federation.+###                                        
|            | 
|4.53        |  | Credit Agreement, dated January 15, 2003, by and among VimpelCom, Bayerische Hypo- und Vereinsbank AG and Nordea Bank Sweden AB (publ).###                                                                                        
|            | 
|4.54        |  | Credit Agreement, dated February 24, 2004, by and between VimpelCom-Region and Svenska Handelsbanken AB (publ).^^^                                                                                                                
|            | 
|4.55        |  | Guarantee, executed February 24, 2004, given by VimpelCom in favor of Svenska Handelsbanken AB (publ).^^^                                                                                                                         
|            | 
|4.56        |  | Primary Agreement, dated as of May 30, 2001, by and among VimpelCom, Telenor East Invest AS and Eco Telecom Limited.^                                                                                                             
|            | 
|4.57        |  | Registration Rights Agreement, dated as of May 30, 2001, by and among VimpelCom, Telenor East Invest AS and Eco Telecom Limited.^                                                                                                 
|            | 
|4.57.1      |  | Amendment No. 1 to Registration Rights Agreement, dated August 28, 2003, to Registration Rights Agreement, dated May 30, 2001, by and among VimpelCom, Telenor East Invest AS and Eco Telecom
Limited. ^^^                        
|            | 
|4.58        |  | Primary Agreement, dated as of May 30, 2001, by and among VimpelCom-Region, Eco Telecom Limited, Telenor East Invest AS and VimpelCom.^                                                                                           
|            | 
|4.59        |  | Amendment No. 1 to Primary Agreement, dated May 15, 2002, to Primary Agreement, dated as of May 30, 2001, by and among VimpelCom-Region, Eco Telecom Limited, Telenor East Invest AS and
VimpelCom.^^                             
|            | 
|4.60        |  | Shareholders Agreement, dated as of May 30, 2001, by and among VimpelCom-Region, Eco Telecom Limited, Telenor East Invest AS and VimpelCom.^                                                                                      
|            | 
|4.61        |  | Amendment No. 1 to Shareholders Agreement, dated as of May 15, 2002, to Shareholders Agreement, dated May 30, 2001, by and among VimpelCom-Region, Eco Telecom Limited, Telenor East Invest AS
and VimpelCom.^^                   
|            | 
|4.62        |  | Registration Rights Agreement, dated as of May 30, 2001, by and among VimpelCom-Region, Eco Telecom Limited, Telenor East Invest AS and Vimpel-Com.^                                                                              
|            | 
|4.63        |  | Amendment No. 1 to Registration Rights Agreement, dated May 15, 2002, to Registration Rights Agreement, dated as of May 30, 2001, by and among VimpelCom-Region, Eco Telecom Limited, Telenor
East Invest AS and VimpelCom.^^     
|            | 
|4.64        |  | Guarantee Agreement, dated as of May 30, 2001, by and among Telenor ASA, as guarantor, and VimpelCom, VimpelCom-Region and Eco Telecom Limited, as beneficiaries.####                                                             
|            | 
|4.65        |  | Guarantee Agreement, dated as of May 30, 2001, by and among CTF Holdings Limited, as limited guarantor, Eco Holdings Limited, as general guarantor, and VimpelCom, VimpelCom-Region and Telenor
East Invest AS, as beneficiaries.^
|            | 
|4.66        |  | Undertaking Letter, dated May 30, 2001, by and between Telenor East Invest AS and VimpelCom.^                                                                                                                                     
|            | 
|4.67        |  | Undertaking Letter, dated May 30, 2001, by and between Eco Telecom Limited and VimpelCom.^                                                                                                                                        
|            | 
|4.68        |  | Preferred Stock Undertaking Letter, dated May 30, 2001, by and among VimpelCom, Telenor East Invest AS, Eco Telecom Limited, Dr. Dmitri B. Zimin and Overture Limited.^                                                           



157



---

##### Table of Contents

|            |  |                                                                                                                                                                                                                                                       
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                           
|4.69        |  | Additional Agreement No. 1, dated May 30, 2001, to License Agreement No. TM 18-2001 BKP dated January 24, 2001, by and between VimpelCom and VimpelCom-Region.^                                                                                       
|            | 
|4.70        |  | Additional Agreement No. 1, dated May 30, 2001, to License Agreement No. TM 19-2001 BKP dated January 24, 2001, by and between VimpelCom and VimpelCom-Region.^                                                                                       
|            | 
|4.71        |  | License Agreement No. TM 25-2001, dated May 30, 2001, by and between VimpelCom and VimpelCom-Region.^                                                                                                                                                 
|            | 
|4.72        |  | License Agreement No. TM 26-2001, dated May 30, 2001, by and between VimpelCom and VimpelCom-Region.^                                                                                                                                                 
|            | 
|4.73        |  | License Agreement No. TM 27-2001, dated May 30, 2001, by and between VimpelCom and VimpelCom-Region.^                                                                                                                                                 
|            | 
|4.74        |  | License Agreement No. TM 28-2001, dated May 30, 2001, by and between VimpelCom and VimpelCom-Region.^                                                                                                                                                 
|            | 
|4.75        |  | License Agreement No. TM-2003 VCR (not dated) by and between VimpelCom and VimpelCom-Region.+^^^                                                                                                                                                      
|            | 
|4.76        |  | Sublicense Agreement No. TM-2003 VZT, dated July 1, 2003, by and between VimpelCom-Region and Vostok-Zapad Telecom.+^^^                                                                                                                               
|            | 
|4.77        |  | License Agreement No. TM-2004 KBI, dated February 2, 2004, by and between VimpelCom and KB Impuls.+^^^                                                                                                                                                
|            | 
|4.78        |  | Share Purchase Agreement, dated December 15, 2002, by and between Telenor Mobile Communications AS and VimpelCom-Region, related to the acquisition of Closed Joint Stock Company
Extel.###                                                         
|            | 
|4.79        |  | Share Purchase Agreement, dated December 15, 2002, by and between Telenor Mobile Communications AS and VimpelCom-Region, related to the acquisition of Open Joint Stock Company
StavTeleSot.###                                                     
|            | 
|4.80        |  | Summary of Terms of Proposed Ruble Bond Issuance by OOO VimpelCom Finance that appeared in the Russian-language Bonds Issuance Prospectus filed with the Federal Commission of the Securities
Market of the Russian Federation on April 3, 2003.+#####
|            | 
|8.          |  | List of Subsidiaries.^^^                                                                                                                                                                                                                              
|            | 
|12.1        |  | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.^^^                                                                                                                                                                    
|            | 
|12.2        |  | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.^^^                                                                                                                                                                    
|            | 
|13.1        |  | Certification of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.^^^                                                                                                                                    
|            | 
|14.1        |  | Consent of Ernst & Young (CIS) Limited.^^^                                                                                                                                                                                                            

---

|* | Incorporated by reference to the Registration Statement on Form F-1 (Registration No. 333-5694) of Open Joint Stock Company Vimpel-Communications.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|** | Incorporated by reference to the Registration Statement on Form F-1 (Registration No. 333-6826) of Open Joint Stock Company Vimpel-Communications.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|*** | Incorporated by reference to the Registration Statement on Form F-3 (Registration No. 333-12210) of Open Joint Stock Company Vimpel-Communications.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | Incorporated by reference to the Annual Report on Form 20-F of Open Joint Stock Company Vimpel-Communications for the fiscal year ended December 31, 1997.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Incorporated by reference to the Annual Report on Form 20-F of Open Joint Stock Company Vimpel-Communications for the fiscal year ended December 31, 1998.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



158



---

##### Table of Contents

| | Incorporated by reference to the Annual Report on Form 20-F of Open Joint Stock Company Vimpel-Communications for the fiscal year ended December 31, 1999.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|# | Incorporated by reference to the Annual Report on Form 20-F of Open Joint Stock Company Vimpel-Communications for the fiscal year ended December 31, 2000.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|## | Incorporated by reference to the Annual Report on Form 20-F of Open Joint Stock Company Vimpel-Communications for the fiscal year ended December 31, 2001.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|### | Incorporated by reference to the Annual Report on Form 20-F of Open Joint Stock Company Vimpel-Communications for the fiscal year ended December 31, 2002.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|#### | Incorporated by reference to Form 6-K of Open Joint Stock Company Vimpel-Communications filed with the Securities and Exchange Commission on May 9, 2001.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|##### | Incorporated by reference to Form 6-K of Open Joint Stock Company Vimpel-Communications filed with the Securities and Exchange Commission on April 3, 2003.
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|^ | Incorporated by reference to Form 6-K of Open Joint Stock Company Vimpel-Communications filed with the Securities and Exchange Commission on June 14, 2001.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|^^ | Incorporated by reference to Form 6-K of Open Joint Stock Company Vimpel-Communications filed with the Securities and Exchange Commission on May 21, 2002.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|^^^ | Filed herewith.
|--- | ---------------

|+ | English translation.
|- | --------------------



159



---

##### Table of Contents

SIGNATURE



The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this Annual Report on Form 20-F on its behalf.



OPEN JOINT STOCK COMPANY VIMPEL- COMMUNICATIONSBy:

/s/    Alexander V. IzosimovName:

Alexander V. IzosimovTitle:

Chief Executive Officer




Date: May 7, 2004





160



---

##### Table of Contents

INDEX TO FINANCIAL STATEMENTS



OF
OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



|                                                |  |    
|----------------------------------------------- |  | ---
|                                                | 
|Report of Independent Auditors                  |  | F-2
|                                                | 
|Consolidated Financial Statements               |  | F-3
|                                                | 
|Consolidated Balance Sheets                     |  | F-3
|                                                | 
|Consolidated Statements of Income               |  | F-4
|                                                | 
|Consolidated Statements of Shareholders Equity |  | F-5
|                                                | 
|Consolidated Statements of Cash Flows           |  | F-6
|                                                | 
|Notes to Consolidated Financial Statements      |  | F-7



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT AUDITORS



The Board of
Directors and Shareholders

Open Joint Stock Company Vimpel-Communications



We have audited the accompanying consolidated balance sheets of Open Joint Stock Company Vimpel-Communications
(VimpelCom) as of December 31, 2003 and 2002, and the related consolidated statements of income, shareholders equity and cash flows for each of the three years in the period ended December 31, 2003. These consolidated financial
statements are the responsibility of VimpelComs management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.



In our opinion,
the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Open Joint Stock Company Vimpel-Communications at December 31, 2003 and 2002, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.



As discussed in Note 2 to the consolidated financial statements, in 2003,
Open Joint Stock Company Vimpel-Communications adopted Financial Accounting Standards Board Statement No. 143, changing its method of accounting for asset retirement obligations.



Ernst & Young (CIS) Limited

Moscow, Russia

March 15, 2004,

except for Note 27, as to which the date is

March 18, 2004



F-2



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                |  |                                                      |           |   |      |     |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------- | --------- | - | ---- | --- | --------- | -
|                                                                                                                                                |  | December 31,                                         |          
|                                                                                                                                                |  | 2003                                                 |           |   | 2002 |    
|                                                                                                                                                |  | (In thousands of U.S. Dollars, except share amounts) |          
|Assets                                                                                                                                          |  |                                                      |           |   |      |     |           |  
|Current assets:                                                                                                                                 |  |                                                      |           |   |      |     |           |  
|Cash and cash equivalents (Note 6)                                                                                                              |  | US$                                                  | 157,611   |   |      | US$ | 263,657   |  
|Trade accounts receivable, net of allowance for doubtful accounts of US$7,958 in 2003 and US$12,916 in 2002 (Note 22)                           |  |                                                      | 113,092   |   |      |     | 75,399    |  
|Inventory                                                                                                                                       |  |                                                      | 17,905    |   |      |     | 15,209    |  
|Deferred income taxes (Note 21)                                                                                                                 |  |                                                      | 21,377    |   |      |     | 15,742    |  
|Input value added tax (Note 2)                                                                                                                  |  |                                                      | 175,045   |   |      |     | 85,331    |  
|Other current assets (Note 7)                                                                                                                   |  |                                                      | 41,213    |   |      |     | 33,027    |  
|                                                                                                                                                |  |                                                      |           |   |      |     |           |  
|Total current assets                                                                                                                            |  |                                                      | 526,243   |   |      |     | 488,365   |  
|Property and equipment, net (Note 9)                                                                                                            |  |                                                      | 1,460,542 |   |      |     | 957,602   |  
|Telecommunications licenses and allocations of frequencies, net (Note 11)                                                                       |  |                                                      | 103,817   |   |      |     | 88,385    |  
|Other intangible assets, net (Note 11)                                                                                                          |  |                                                      | 59,369    |   |      |     | 55,730    |  
|Due from related parties (Note 23)                                                                                                              |  |                                                      | 1,171     |   |      |     | 2,083     |  
|Unamortized debt issue costs (Note 14)                                                                                                          |  |                                                      | 4,744     |   |      |     | 8,075     |  
|Other assets (Note 12)                                                                                                                          |  |                                                      | 146,346   |   |      |     | 92,504    |  
|                                                                                                                                                |  |                                                      |           |   |      |     |           |  
|Total assets                                                                                                                                    |  | US$                                                  | 2,302,232 |   |      | US$ | 1,692,744 |  
|                                                                                                                                                |  |                                                      |           |   |      |     |           |  
|Liabilities and shareholders equity                                                                                                            |  |                                                      |           |   |      |     |           |  
|Current liabilities:                                                                                                                            |  |                                                      |           |   |      |     |           |  
|Accounts payable                                                                                                                                |  | US$                                                  | 158,467   |   |      | US$ | 80,241    |  
|Due to related parties (Note 23)                                                                                                                |  |                                                      | 8,603     |   |      |     | 4,114     |  
|Due to employees                                                                                                                                |  |                                                      | 14,791    |   |      |     | 5,731     |  
|Accrued liabilities                                                                                                                             |  |                                                      | 10,153    |   |      |     | 10,455    |  
|Taxes payable                                                                                                                                   |  |                                                      | 101,294   |   |      |     | 33,306    |  
|Deferred revenue                                                                                                                                |  |                                                      | 2,701     |   |      |     | 2,016     |  
|Deferred income taxes (Note 21)                                                                                                                 |  |                                                      | 1,451     |   |      |     |          |  
|Customer advances                                                                                                                               |  |                                                      | 140,756   |   |      |     | 53,469    |  
|Customer deposits                                                                                                                               |  |                                                      | 40,719    |   |      |     | 53,186    |  
|Capital lease obligations (Note 17)                                                                                                             |  |                                                      | 6,587     |   |      |     | 3,868     |  
|Rouble denominated bonds payable (Note 15)                                                                                                      |  |                                                      | 101,852   |   |      |     |          |  
|Bank loans, current portion (Note 13)                                                                                                           |  |                                                      | 35,343    |   |      |     | 37,780    |  
|Equipment financing obligations, current portion (Note 16)                                                                                      |  |                                                      | 70,935    |   |      |     | 134,617   |  
|                                                                                                                                                |  |                                                      |           |   |      |     |           |  
|Total current liabilities                                                                                                                       |  |                                                      | 693,652   |   |      |     | 418,783   |  
|Deferred income taxes (Note 21)                                                                                                                 |  |                                                      | 34,380    |   |      |     | 35,227    |  
|Bank loans, less current portion (Note 13)                                                                                                      |  |                                                      | 330,112   |   |      |     | 306,080   |  
|5.5% Senior convertible notes due July 2005 (Note 14)                                                                                           |  |                                                      |          |   |      |     | 85,911    |  
|Capital lease obligations, less current portion (Note 17)                                                                                       |  |                                                      | 9,154     |   |      |     | 899       |  
|Equipment financing obligations, less current portion (Note 16)                                                                                 |  |                                                      | 53,008    |   |      |     | 81,425    |  
|Accrued liabilities                                                                                                                             |  |                                                      | 4,046     |   |      |     | 3,265     |  
|Commitments and contingent liabilities (Note 16, 27)                                                                                            |  |                                                      |          |   |      |     |          |  
|Minority interest                                                                                                                               |  |                                                      | 179,664   |   |      |     | 98,491    |  
|Shareholders equity (Note 18):                                                                                                                 |  |                                                      |           |   |      |     |           |  
|Convertible voting preferred stock (.005 rubles nominal value per share), 10,000,000 shares authorized; 6,426,600 shares issued and
outstanding |  |                                                      |          |   |      |     |          |  
|Common stock (.005 rubles nominal value per share), 90,000,000 shares authorized; 40,332,201 shares issued                                      |  |                                                      | 90        |   |      |     | 90        |  
|Additional paid-in capital                                                                                                                      |  |                                                      | 569,828   |   |      |     | 528,914   |  
|Retained earnings                                                                                                                               |  |                                                      | 429,262   |   |      |     | 195,300   |  
|Accumulated other comprehensive income, net of tax of US$969 (Note 2)                                                                           |  |                                                      | 2,466     |   |      |     |          |  
|Treasury stock, at cost, 160,634 shares of common stock (2002: 2,283,277)                                                                       |  |                                                      | (3,430    | ) |      |     | (61,641   | )
|                                                                                                                                                |  |                                                      |           |   |      |     |           |  
|Total shareholders equity                                                                                                                      |  |                                                      | 998,216   |   |      |     | 662,663   |  
|                                                                                                                                                |  |                                                      |           |   |      |     |           |  
|Total liabilities and shareholders equity                                                                                                      |  | US$                                                  | 2,302,232 |   |      | US$ | 1,692,744 |  
|                                                                                                                                                |  |                                                      |           |   |      |     |           |  



See accompanying notes



F-3



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



CONSOLIDATED STATEMENTS OF INCOME



|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------- | --------- | - | ---- | --- | ------- | ---- |  | --- | ------- | -
|                                                                                                                   |  | December 31,                                            |          
|                                                                                                                   |  | 2003                                                    |           |   | 2002 |     |         | 2001 | 
|                                                                                                                   |  | (In thousands of U.S. Dollars, except per shareamounts) |          
|Operating revenues:                                                                                                |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Service revenues and connection fees                                                                               |  | US$                                                     | 1,266,662 |   |      | US$ | 727,868 |      |  | US$ | 383,321 |  
|Sales of handsets and accessories                                                                                  |  |                                                         | 64,975    |   |      |     | 49,934  |      |  |     | 43,228  |  
|Other revenues                                                                                                     |  |                                                         | 3,961     |   |      |     | 1,842   |      |  |     | 1,347   |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Total operating revenues                                                                                           |  |                                                         | 1,335,598 |   |      |     | 779,644 |      |  |     | 427,896 |  
|Revenue-based taxes (Note 3)                                                                                       |  |                                                         |          |   |      |     | (11,148 | )    |  |     | (5,294  | )
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Net operating revenues                                                                                             |  |                                                         | 1,335,598 |   |      |     | 768,496 |      |  |     | 422,602 |  
|Operating expenses:                                                                                                |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Service costs                                                                                                      |  |                                                         | 191,441   |   |      |     | 111,387 |      |  |     | 74,097  |  
|Cost of handsets and accessories sold                                                                              |  |                                                         | 54,044    |   |      |     | 41,764  |      |  |     | 37,591  |  
|Selling, general and administrative expenses                                                                       |  |                                                         | 467,655   |   |      |     | 271,963 |      |  |     | 149,052 |  
|Depreciation                                                                                                       |  |                                                         | 151,262   |   |      |     | 85,204  |      |  |     | 48,690  |  
|Amortization                                                                                                       |  |                                                         | 34,064    |   |      |     | 12,213  |      |  |     | 12,616  |  
|Provision for doubtful accounts                                                                                    |  |                                                         | 9,228     |   |      |     | 21,173  |      |  |     | 13,406  |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Total operating expenses                                                                                           |  |                                                         | 907,694   |   |      |     | 543,704 |      |  |     | 335,452 |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Operating income                                                                                                   |  |                                                         | 427,904   |   |      |     | 224,792 |      |  |     | 87,150  |  
|Other income and expenses:                                                                                         |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Interest income                                                                                                    |  |                                                         | 8,378     |   |      |     | 7,169   |      |  |     | 5,733   |  
|Other income                                                                                                       |  |                                                         | 6,296     |   |      |     | 3,903   |      |  |     | 2,517   |  
|Interest expense                                                                                                   |  |                                                         | (68,246   | ) |      |     | (46,586 | )    |  |     | (26,865 | )
|Other expenses                                                                                                     |  |                                                         | (3,251    | ) |      |     | (2,142  | )    |  |     | (2,578  | )
|Net foreign exchange loss                                                                                          |  |                                                         | (1,279    | ) |      |     | (9,439  | )    |  |     | (110    | )
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Total other income and expenses                                                                                    |  |                                                         | (58,102   | ) |      |     | (47,095 | )    |  |     | (21,303 | )
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Income before income taxes, minority interest and cumulative effect of change in accounting principle              |  |                                                         | 369,802   |   |      |     | 177,697 |      |  |     | 65,847  |  
|Income tax expense (Note 21)                                                                                       |  |                                                         | 108,641   |   |      |     | 49,939  |      |  |     | 18,539  |  
|Minority interest in earnings (losses) of subsidiaries, before cumulative effect of change in accounting principle |  |                                                         | 26,872    |   |      |     | (1,794  | )    |  |     | 7       |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Income before cumulative effect of change in accounting principle                                                  |  |                                                         | 234,289   |   |      |     | 129,552 |      |  |     | 47,301  |  
|Cumulative effect of change in accounting principle, net of tax of US$120 (Note 2)                                 |  |                                                         | (379      | ) |      |     |        |      |  |     |        |  
|Minority interest in cumulative effect of change in accounting principle                                           |  |                                                         | 52        |   |      |     |        |      |  |     |        |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Net income                                                                                                         |  | US$                                                     | 233,962   |   |      | US$ | 129,552 |      |  | US$ | 47,301  |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Basic EPS:                                                                                                         |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Income before cumulative effect of change in accounting principle                                                  |  | US$                                                     | 6.13      |   |      | US$ | 3.41    |      |  | US$ | 1.41    |  
|Net income per common share                                                                                        |  |                                                         | 6.12      |   |      |     | 3.41    |      |  |     | 1.41    |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Weighted average common shares outstanding                                                                         |  |                                                         | 38,241    |   |      |     | 38,014  |      |  |     | 33,642  |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Income before cumulative effect of change in accounting principle per ADS equivalent                               |  | US$                                                     | 4.60      |   |      | US$ | 2.56    |      |  | US$ | 1.06    |  
|Net income per ADS equivalent                                                                                      |  |                                                         | 4.59      |   |      |     | 2.56    |      |  |     | 1.06    |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Diluted EPS:                                                                                                       |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Income before cumulative effect of change in accounting principle                                                  |  | US$                                                     | 5.23      |   |      | US$ | 2.91    |      |  | US$ | 1.18    |  
|Net income per common share                                                                                        |  |                                                         | 5.22      |   |      |     | 2.91    |      |  |     | 1.18    |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Weighted average diluted shares(Note 24)                                                                           |  |                                                         | 46,770    |   |      |     | 44,489  |      |  |     | 40,068  |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  
|Income before cumulative effect of change in accounting principle per ADS equivalent                               |  | US$                                                     | 3.92      |   |      | US$ | 2.18    |      |  | US$ | 0.89    |  
|Net income per ADS equivalent                                                                                      |  |                                                         | 3.92      |   |      |     | 2.18    |      |  |     | 0.89    |  
|                                                                                                                   |  |                                                         |           |   |      |     |         |      |  |     |         |  



See accompanying notes.



F-4



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND ACCUMULATED OTHER

COMPREHENSIVE INCOME

Years ended December 31, 2003, 2002 and 2001



|                                                                                                                               |  |                                               |  |                          |    |                  |     |               |  |     |                                      |  |       |         |   |  |     |       |  |     |         |  
|------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------- |  | ------------------------ | -- | ---------------- | --- | ------------- |  | --- | ------------------------------------ |  | ----- | ------- | - |  | --- | ----- |  | --- | ------- | -
|                                                                                                                               |  | Common Stock                                  |  | AdditionalPaid-inCapital |    | RetainedEarnings |     | TreasuryStock |  |     | AccumulatedOther ComprehensiveIncome |  | Total |        
|                                                                                                                               |  | Shares                                        |  | Amount                   |    |                  |     |               | 
|                                                                                                                               |  | (In thousands of U.S. dollars, except shares) | 
|Balances at December 31, 2000                                                                                                  |  | 35,182,201                                    |  | US$                      | 89 |                  | US$ | 412,680       |  | US$ | 18,447                               |  | US$   | (62,593 | ) |  | US$ |      |  | US$ | 368,623 |  
|Proceeds from issue of common stock to Eco Telecom under the Agreement dated May 30, 2001, net of cost of issuance (US$10,803) |  | 5,150,000                                     |  |                          | 1  |                  |     | 92,196        |  |     |                                     |  |       |        |   |  |     |      |  |     | 92,197  |  
|Acquisition of treasury stock  3,744 shares                                                                                   |  |                                              |  |                          |   |                  |     |              |  |     |                                     |  |       | (75     | ) |  |     |      |  |     | (75     | )
|Sales of treasury stock  3,744 shares                                                                                         |  |                                              |  |                          |   |                  |     |              |  |     |                                     |  |       | 75      |   |  |     |      |  |     | 75      |  
|Net income                                                                                                                     |  |                                              |  |                          |   |                  |     |              |  |     | 47,301                               |  |       |        |   |  |     |      |  |     | 47,301  |  
|                                                                                                                               |  |                                               |  |                          |    |                  |     |               |  |     |                                      |  |       |         |   |  |     |       |  |     |         |  
|Balances at December 31, 2001                                                                                                  |  | 40,332,201                                    |  |                          | 90 |                  |     | 504,876       |  |     | 65,748                               |  |       | (62,593 | ) |  |     |      |  |     | 508,121 |  
|Gain from issuance of subsidiary stock (Note 18)                                                                               |  |                                              |  |                          |   |                  |     | 23,073        |  |     |                                     |  |       |        |   |  |     |      |  |     | 23,073  |  
|Sale of treasury stock  47,649 shares                                                                                         |  |                                              |  |                          |   |                  |     | 965           |  |     |                                     |  |       | 952     |   |  |     |      |  |     | 1,917   |  
|Net income                                                                                                                     |  |                                              |  |                          |   |                  |     |              |  |     | 129,552                              |  |       |        |   |  |     |      |  |     | 129,552 |  
|                                                                                                                               |  |                                               |  |                          |    |                  |     |               |  |     |                                      |  |       |         |   |  |     |       |  |     |         |  
|Balances at December 31, 2002                                                                                                  |  | 40,332,201                                    |  |                          | 90 |                  |     | 528,914       |  |     | 195,300                              |  |       | (61,641 | ) |  |     |      |  |     | 662,663 |  
|Gain from issuance of subsidiary stock (Note 18)                                                                               |  |                                              |  |                          |   |                  |     | 4,947         |  |     |                                     |  |       |        |   |  |     |      |  |     | 4,947   |  
|Sale of treasury stock  69,469 shares                                                                                         |  |                                              |  |                          |   |                  |     | 3,350         |  |     |                                     |  |       | 1,379   |   |  |     |      |  |     | 4,729   |  
|Conversion of Senior convertible notes  2,053,174 shares (Note 18)                                                            |  |                                              |  |                          |   |                  |     | 32,617        |  |     |                                     |  |       | 56,832  |   |  |     |      |  |     | 89,449  |  
|Comprehensive income:                                                                                                          |  |                                               |  |                          |    |                  |     |               |  |     |                                      |  |       |         |   |  |     |       |  |     |         |  
|Foreign currency translation adjustment (Note 2)                                                                               |  |                                              |  |                          |   |                  |     |              |  |     |                                     |  |       |        |   |  |     | 2,466 |  |     | 2,466   |  
|Net income                                                                                                                     |  |                                              |  |                          |   |                  |     |              |  |     | 233,962                              |  |       |        |   |  |     |      |  |     | 233,962 |  
|                                                                                                                               |  |                                               |  |                          |    |                  |     |               |  |     |                                      |  |       |         |   |  |     |       |  |     |         |  
|Total accumulated other comprehensive income                                                                                   |  |                                              |  |                          |   |                  |     |              |  |     | 233,962                              |  |       |        |   |  |     | 2,466 |  |     | 236,428 |  
|                                                                                                                               |  |                                               |  |                          |    |                  |     |               |  |     |                                      |  |       |         |   |  |     |       |  |     |         |  
|Balances at December 31, 2003                                                                                                  |  | 40,332,201                                    |  | US$                      | 90 |                  | US$ | 569,828       |  | US$ | 429,262                              |  | US$   | (3,430  | ) |  | US$ | 2,466 |  | US$ | 998,216 |  
|                                                                                                                               |  |                                               |  |                          |    |                  |     |               |  |     |                                      |  |       |         |   |  |     |       |  |     |         |  



See accompanying notes.



F-5



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                             |  |                                |          |   |      |     |          |      |  |     |          |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------------------ | -------- | - | ---- | --- | -------- | ---- |  | --- | -------- | -
|                                                                                                             |  | December 31,                   |         
|                                                                                                             |  | 2003                           |          |   | 2002 |     |          | 2001 | 
|                                                                                                             |  | (In thousands of U.S. Dollars) |         
|Operating activities                                                                                         |  |                                |          |   |      |     |          |      |  |     |          |  
|Net income                                                                                                   |  | US$                            | 233,962  |   |      | US$ | 129,552  |      |  | US$ | 47,301   |  
|Adjustments to reconcile net income to net cash provided by operating activities:                            |  |                                |          |   |      |     |          |      |  |     |          |  
|Depreciation                                                                                                 |  |                                | 151,262  |   |      |     | 85,204   |      |  |     | 48,690   |  
|Amortization                                                                                                 |  |                                | 34,064   |   |      |     | 12,213   |      |  |     | 12,616   |  
|Mark-to-market adjustments for short-term investments                                                        |  |                                |         |   |      |     | (36      | )    |  |     | (420     | )
|Provision for deferred taxes                                                                                 |  |                                | (11,568  | ) |      |     | (8,385   | )    |  |     | (9,970   | )
|Loss on foreign currency translation                                                                         |  |                                | 1,279    |   |      |     | 9,439    |      |  |     | 110      |  
|Provision for doubtful accounts                                                                              |  |                                | 9,228    |   |      |     | 21,173   |      |  |     | 13,406   |  
|Minority interest in earnings (losses) of subsidiaries                                                       |  |                                | 26,872   |   |      |     | (1,794   | )    |  |     | 7        |  
|Cumulative effect of change in accounting principle                                                          |  |                                | 379      |   |      |     |         |      |  |     |         |  
|Changes in operating assets and liabilities:                                                                 |  |                                |          |   |      |     |          |      |  |     |          |  
|Short-term investments                                                                                       |  |                                |         |   |      |     | 956      |      |  |     | 50       |  
|Trade accounts receivable                                                                                    |  |                                | (41,781  | ) |      |     | (42,659  | )    |  |     | (32,305  | )
|Inventory                                                                                                    |  |                                | (2,069   | ) |      |     | (3,209   | )    |  |     | 1,398    |  
|Input value added tax                                                                                        |  |                                | (77,258  | ) |      |     | (49,692  | )    |  |     | (24,311  | )
|Other current assets                                                                                         |  |                                | (694     | ) |      |     | (18,358  | )    |  |     | 880      |  
|Due from related parties                                                                                     |  |                                | 1,732    |   |      |     | 1,050    |      |  |     | 692      |  
|Due to related parties                                                                                       |  |                                | 3,004    |   |      |     | (973     | )    |  |     | (1,371   | )
|Accounts payable                                                                                             |  |                                | 26,998   |   |      |     | 3,053    |      |  |     | 10,048   |  
|Customer advances and deposits                                                                               |  |                                | 73,502   |   |      |     | 42,411   |      |  |     | 29,029   |  
|Deferred revenue                                                                                             |  |                                | (957     | ) |      |     | (615     | )    |  |     | (23      | )
|Accrued liabilities                                                                                          |  |                                | 83,922   |   |      |     | 42,393   |      |  |     | 5,232    |  
|                                                                                                             |  |                                |          |   |      |     |          |      |  |     |          |  
|Net cash provided by operating activities                                                                    |  |                                | 511,877  |   |      |     | 221,723  |      |  |     | 101,059  |  
|Financing activities                                                                                         |  |                                |          |   |      |     |          |      |  |     |          |  
|Proceeds from bank and other loans                                                                           |  |                                | 160,285  |   |      |     | 331,082  |      |  |     | 1,899    |  
|Repayments of bank and other loans                                                                           |  |                                | (86,261  | ) |      |     | (30,461  | )    |  |     | (2,168   | )
|Proceeds from issuance of rouble denominated bonds                                                           |  |                                | 97,119   |   |      |     |         |      |  |     |         |  
|Repayment of senior convertible notes                                                                        |  |                                | (1,300   | ) |      |     |         |      |  |     |         |  
|Capital contributions in a consolidated subsidiary by minority shareholders                                  |  |                                | 58,520   |   |      |     | 116,960  |      |  |     |         |  
|Payments of fees in respect of debt issue                                                                    |  |                                | (4,207   | ) |      |     | (6,203   | )    |  |     | (366     | )
|Repayment of lease obligations                                                                               |  |                                | (917     | ) |      |     | (1,450   | )    |  |     | (1,292   | )
|Repayment of equipment financing obligations                                                                 |  |                                | (256,902 | ) |      |     | (115,473 | )    |  |     | (36,338  | )
|Proceeds from sale of capital stock                                                                          |  |                                |         |   |      |     |         |      |  |     | 103,000  |  
|Payments of fees in respect of capital contributions                                                         |  |                                | (2,478   | ) |      |     |         |      |  |     | (10,803  | )
|Purchase of treasury shares                                                                                  |  |                                |         |   |      |     |         |      |  |     | (75      | )
|Proceeds from sale of treasury shares                                                                        |  |                                |         |   |      |     |         |      |  |     | 75       |  
|                                                                                                             |  |                                |          |   |      |     |          |      |  |     |          |  
|Net cash (used in) provided by financing activities                                                          |  |                                | (36,141  | ) |      |     | 294,455  |      |  |     | 53,932   |  
|Investing activities                                                                                         |  |                                |          |   |      |     |          |      |  |     |          |  
|Purchases of property and equipment                                                                          |  |                                | (506,716 | ) |      |     | (291,437 | )    |  |     | (136,353 | )
|Purchases of intangible assets                                                                               |  |                                | (18,654  | ) |      |     | (14,769  | )    |  |     | (4,398   | )
|Proceeds from sale of property and equipment                                                                 |  |                                | 12,433   |   |      |     |         |      |  |     |         |  
|Purchase of StavTeleSot stock, net of cash acquired of US$658                                                |  |                                | (42,455  | ) |      |     |         |      |  |     |         |  
|Purchase of MSS-Start and Cellular Company stock, net of cash acquired of US$968                             |  |                                |         |   |      |     |         |      |  |     | (6,768   | )
|Purchase of Orensot, Bee-Line Samara, Extel and Vostok-Zapad                                                 |  |                                |          |   |      |     |          |      |  |     |          |  
|Telecom stock, net of cash acquired of US$1,537                                                              |  |                                |         |   |      |     | (69,165  | )    |  |     |         |  
|Purchases of other assets                                                                                    |  |                                | (38,561  | ) |      |     | (26,560  | )    |  |     | (14,135  | )
|                                                                                                             |  |                                |          |   |      |     |          |      |  |     |          |  
|Net cash used in investing activities                                                                        |  |                                | (593,953 | ) |      |     | (401,931 | )    |  |     | (161,654 | )
|Effect of exchange rate changes on cash and cash equivalents                                                 |  |                                | 12,171   |   |      |     | 5,238    |      |  |     | (1,306   | )
|                                                                                                             |  |                                |          |   |      |     |          |      |  |     |          |  
|Net (decrease) increase in cash                                                                              |  |                                | (106,046 | ) |      |     | 119,485  |      |  |     | (7,969   | )
|Cash and cash equivalents at beginning of year                                                               |  |                                | 263,657  |   |      |     | 144,172  |      |  |     | 152,141  |  
|                                                                                                             |  |                                |          |   |      |     |          |      |  |     |          |  
|Cash and cash equivalents at end of year                                                                     |  | US$                            | 157,611  |   |      | US$ | 263,657  |      |  | US$ | 144,172  |  
|                                                                                                             |  |                                |          |   |      |     |          |      |  |     |          |  
|Supplemental cash flow information                                                                           |  |                                |          |   |      |     |          |      |  |     |          |  
|Cash paid during the period:                                                                                 |  |                                |          |   |      |     |          |      |  |     |          |  
|Income tax                                                                                                   |  | US$                            | 86,409   |   |      | US$ | 52,594   |      |  | US$ | 18,870   |  
|Interest                                                                                                     |  |                                | 61,934   |   |      |     | 30,810   |      |  |     | 16,289   |  
|Non-cash activities:                                                                                         |  |                                |          |   |      |     |          |      |  |     |          |  
|Equipment acquired under financing agreements                                                                |  |                                | 88,689   |   |      |     | 140,367  |      |  |     | 82,990   |  
|Accounts payable for equipment and license                                                                   |  |                                | 78,032   |   |      |     | 50,117   |      |  |     | 15,652   |  
|Accrued debt and equity offering costs                                                                       |  |                                |         |   |      |     |         |      |  |     | 554      |  
|Operating activities financed by sale of treasury stock                                                      |  |                                | 4,729    |   |      |     | 1,917    |      |  |     |         |  
|Conversion of Senior convertible notes                                                                       |  |                                | 91,236   |   |      |     |         |      |  |     |         |  
|Acquisitions:                                                                                                |  |                                |          |   |      |     |          |      |  |     |          |  
|Fair value of assets acquired                                                                                |  |                                | 73,290   |   |      |     | 121,388  |      |  |     | 20,217   |  
|Difference between the amount paid and the fair value of net assets acquired                                 |  |                                | (4,699   | ) |      |     |         |      |  |     |         |  
|Carrying value of equity method investment in Bee-Line Samara before the acquisition of controlling interest |  |                                |         |   |      |     | (6,540   | )    |  |     |         |  
|Cash paid for the capital stock                                                                              |  |                                | (43,113  | ) |      |     | (70,702  | )    |  |     | (7,736   | )
|                                                                                                             |  |                                |          |   |      |     |          |      |  |     |          |  
|Liabilities assumed                                                                                          |  | US$                            | 25,478   |   |      | US$ | 44,146   |      |  | US$ | 12,481   |  
|                                                                                                             |  |                                |          |   |      |     |          |      |  |     |          |  



See accompanying notes



F-6



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2003, 2002 and 2001

(Amounts presented are in thousands of US dollars unless otherwise indicated)



|1. | DESCRIPTION OF BUSINESS
|-- | -----------------------



Open Joint Stock Company Vimpel-Communications (VimpelCom) was registered in the Russian Federation on September 15, 1992 as a
closed joint stock company, re-registered as an open joint stock company on July 28, 1993 and began full-scale commercial operations in June 1994. On November 20, 1996, VimpelCom completed an initial public offering (IPO) of its common
stock in the United States of America through the issuance of American Depositary Shares (ADS), each of which represents three-quarters of one share of VimpelComs common stock. As of December 31, 2003, 56.22% of VimpelComs
outstanding common stock was owned by the holders of the ADSs; 28.98% by Telenor East Invest AS (Telenor); 13.05% by Eco Telecom Limited (Eco Telecom) and 1.75% by others. As of December 31, 2003, 48.49% of VimpelComs
voting stock was owned by the holders of the ADSs; 25.00% plus 13 shares by Telenor East Invest AS (Telenor); 25.00% plus two shares by Eco Telecom Limited (Eco Telecom) and 1.51% by others.



On May 30, 2001, VimpelCom, Eco Telecom, a part of the Alfa Group of
companies in Russia, Telenor and Closed Joint Stock Company VimpelCom-Region (VimpelCom-Region), a subsidiary of VimpelCom, signed agreements under which Eco Telecom was to purchase strategic ownership interests in VimpelCom and
VimpelCom-Region, subject to certain regulatory approvals and other conditions precedent. VimpelCom-Region was formed to concentrate on the regional development of VimpelComs GSM license portfolio. On November 5, 2001, under the terms of the
transaction, Eco Telecom acquired 5,150,000 newly-issued shares of VimpelComs common stock (equivalent of 6,866,667 ADSs) for an aggregate consideration of US$103,000, which was then contributed by VimpelCom as equity to VimpelCom-Region.



Together with the shares of common stock and convertible
voting preferred stock of VimpelCom which Eco Telecom purchased from certain shareholders of VimpelCom, following the closing of the first tranche of the transaction, Eco Telecom owned 25% plus two shares of VimpelComs total outstanding voting
capital stock. Under the terms of the transaction, Eco Telecom was also to make certain investments directly into VimpelCom-Region (Note 18).



VimpelCom earns revenues by providing wireless telecommunications services and selling wireless handsets and accessories under the trade name
Bee-Line in the city of Moscow and the Moscow region, which comprise the Moscow license area, and other regions of the Russian Federation.



Open Joint Stock Company KB Impuls (KBI), a wholly-owned subsidiary of VimpelCom, was established in March 1991 and has been involved in the
development and provision of wireless telecommunications services under the trade name Bee-Line in Russia. KBI was granted the first license to provide Personal Communications Services (PCS) using the GSM-1800 standard in the
Moscow license area and began full-scale commercial operations in June 1997. This license expires in April 2008.



In April 1998, VimpelCom was awarded four new GSM-1800 licenses, covering the Central and Central Black Earth, Volga, North Caucasus and Siberian regions
of the Russian Federation.



In August 1998, VimpelCom and KBI
received amendments to the original GSM-1800 licenses for the Moscow license area and the Central and Central Black Earth license area of Russia, to operate dual band GSM 900/1800 networks in these license areas.



In August 1999, VimpelCom received amendments to the original GSM-1800
licenses for the Volga, North Caucasus and Siberian regions of the Russian Federation, to operate dual band GSM 900/1800 networks in these license areas. There was no additional cost associated with these amendments.



F-7



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In April 2000, VimpelComs amended GSM-1800 licenses covering the Central and Central Black
Earth, Volga, North Caucasus and Siberian regions of the Russian Federation were re-issued to VimpelCom-Region.



On September 12, 2002, VimpelCom-Region was awarded a GSM-1800 license for the Northwest region. VimpelCom-Regions subsidiaries, Open Joint Stock
Company Orensot (Orensot), Closed Joint Stock Company Extel (Extel), Open Joint Stock Company Bee-Line Samara (Bee-Line Samara) and Closed Joint Stock Company StavTeleSot (StavTeleSot) hold a
GSM-900/1800 license for the Orenburg license area, GSM-900 license for the Kaliningrad license area, GSM-1800 license for the Samara license area and GSM-900/1800 license for the Stavropol license area, respectively. StavTeleSots
subsidiaries, Closed Joint Stock Company Kabardino-Balkarski GSM (Kabardino-Balkarski GSM) and Closed Joint Stock Company Karachaevo-CherkessTeleSot (Karachaevo-CherkessTeleSot), hold GSM-900 licenses for the
Kabardino-Balkarskaya Republic and Karachaevo-Cherkesskaya Republic, respectively. The GSM license held by Limited Liability Company Vostok-Zapad Telecom (Vostok-Zapad Telecom), a subsidiary of VimpelCom-Region, provides for the
operation of a GSM-1800 network throughout the Ural region and a dual band GSM-900/1800 network in six territories within the Ural region.



In February 2003, VimpelCom-Region received amendments to the original GSM-1800 licenses for the Northwest region of Russia, to operate dual band
GSM-900/1800 networks in these license areas.



In addition,
VimpelCom operates an AMPS/D-AMPS wireless telephone network under a license issued by the State Committee of the Russian Federation for Communications and Informatization, which expires in November 2007.



VimpelCom has also been granted AMPS licenses to operate cellular networks in
the Kaluga, Karelia, Ryazan, Tver, Ulyanovsk, Vladimir and Vologda license areas. VimpelComs subsidiary, Bee-Line Samara, was granted a license to operate an AMPS wireless network in the Samara region. Closed Joint Stock Company Cellular
Company (Cellular Company), a subsidiary of VimpelCom-Region, holds an AMPS license for the Novosibirsk license area.



|2. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
|-- | ---------------------------------------------------------



Basis of Presentation



VimpelCom maintains its records and prepares its financial statements in accordance with Russian accounting and tax legislation and accounting principles
generally accepted in the United States of America (US GAAP). The accompanying consolidated financial statements differ from the financial statements issued for statutory purposes in Russia. The principal differences relate to: (1)
revenue recognition; (2) recognition of interest expense and other operating expenses; (3) valuation and depreciation of property and equipment; (4) foreign currency translation; (5) deferred income taxes; (6) capitalization and amortization of
telephone line capacity; (7) valuation allowances for unrecoverable assets; (8) capital leases; and (9) consolidation and accounting for subsidiaries.



Principles of Consolidation



The accompanying consolidated financial statements include the accounts of VimpelCom and its subsidiaries KBI, Closed Joint Stock Company RTI
Service-Svyaz (RTI Service-Svyaz), Closed Joint Stock Company Impuls KB, Closed Joint Stock Company BeeOnLine-Portal, Closed Joint Stock Company MSS Start (MSS Start), Bee-Line Samara, Vimpelcom Finance B.V. and its
subsidiaries VimpelCom B.V. and VC ESOP N.V., VimpelCom-Region and its subsidiaries Cellular Company, Orensot, Extel, Vostok-Zapad Telecom,



F-8



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



StavTeleSot and its subsidiaries Kabardino-Balkarski GSM and Karachaevo-CherkessTeleSot, Limited Liability Company VimpelCom Finance (VimpelCom
Finance), Closed Joint Stock Company Mobile Communication Center  Smolensk, Closed Joint Stock Company Mobile Communication Center  Lipetsk, Closed Joint Stock Company Mobile Communication Center  Ryazan, Closed Joint Stock
Company Mobile Communication Center  Tver and Closed Joint Stock Company Mobile Communication Center  Nizhny Novgorod. The accompanying consolidated financial statements also include the accounts of VimpelCom (BVI) Limited, a
special-purpose entity affiliated with and controlled by VimpelCom (Note 19), and VC Limited, a wholly-owned subsidiary of VimpelCom (BVI) Limited. The consolidated financial statements as of December 31, 2003 include the accounts of VimpelCom and
its majority-owned subsidiaries that are not considered variable interest entities (VIEs) and all VIEs for which the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated.



In accordance with the requirements of the Financial Accounting Standards
Boards (the FASB) Emerging Issues Task Force Issue (EITF) No. 96-16, Investors Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders
Have Certain Approval or Veto Rights, VimpelCom consolidates majority-owned subsidiaries when minority shareholders do not have substantive participating rights.



The equity method of accounting is used for companies in which VimpelCom has significant influence. Generally this
represents voting stock ownership of at least 20% and not more than 50%.



Foreign Currency Translation



On November 25,
2002, the AICPA International Practices Task Force concluded that Russia would no longer be considered highly inflationary effective January 1, 2003. VimpelCom re-assessed its functional currency as of January 1, 2003.



The functional currency of VimpelCom and its subsidiaries, except for
Cellular Company, Orensot and StavTeleSot, is the US dollar because the majority of their revenues, costs, property and equipment purchased, debt and trade liabilities are either priced, incurred, payable or otherwise measured in US dollars.
Accordingly, transactions and balances not already measured in US dollars (primarily Russian roubles and Euros) have been re-measured into US dollars in accordance with the relevant provisions of US Statement of Financial Accounting Standards
(SFAS) No. 52, Foreign Currency Translation.



Under SFAS No. 52, revenues, costs, capital and non-monetary assets and liabilities are translated at historical exchange rates prevailing on the transaction dates. Monetary assets and liabilities are translated at exchange rates prevailing
on the balance sheet date. Exchange gains and losses arising from re-measurement of monetary assets and liabilities that are not denominated in US dollars are credited or charged to operations.



Effective January 1, 2003, Cellular Companys, Orensots and
StavTeleSots functional currency is the Russian rouble because the majority of their revenues, costs, property and equipment purchased, debt and trade liabilities are either priced, incurred, payable or otherwise measured in Russian roubles.
Assets and liabilities of these companies are translated into US dollars at exchange rates prevailing on the balance sheet date; revenues, expenses, gains and losses are translated into US dollars at historical exchange rates prevailing on the
transactions dates. Translation adjustments resulting from the process of translating their financial statements into US dollars are reported in other comprehensive income, a separate component of shareholders equity.



The rouble is not a fully convertible currency outside the territory of the
Russian Federation. Within the Russian Federation, official exchange rates are determined daily by the Central Bank of Russia (CBR). Market rates may differ from the official rates but the differences are, generally, within narrow
parameters monitored by the CBR.



F-9



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of December 31, 2003 and 2002, the official rates of exchange were 29.45 roubles = US$1 and 31.78
roubles = US$1, respectively. The translation of rouble-denominated assets and liabilities into US dollars for the purposes of these financial statements does not indicate that VimpelCom could realize or settle, in US dollars, the reported values of
these assets and liabilities. Likewise, it does not indicate that VimpelCom could return or distribute the reported US dollar value of capital to its shareholders.



Use of Estimates



The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.



Cash and Cash Equivalents



VimpelCom considers all highly liquid investments with a remaining maturity of 90 days or less at the time of purchase to be cash equivalents. Cash
equivalents are carried at cost which approximates fair value.



Doubtful
Accounts



VimpelCom reviews the valuation of accounts
receivable on a monthly basis. The allowance for doubtful accounts is estimated based on historical experience of cash collections and future expectations of conditions that might impact the collectibility of accounts.



Inventory



Inventory consists of telephone handsets and accessories for resale and is stated at the lower of cost or market. Cost is
computed using the average cost method.



Property and Equipment



Property and equipment is stated at historical cost.
Telecommunications equipment, including equipment acquired under capital leases, is depreciated using the straight-line method over its estimated useful life of nine and one-half years, or the lease term, whichever is shorter. Buildings and
leasehold improvements are depreciated using the straight-line method over estimated useful lives of twenty years. Office and measuring equipment, and vehicles and furniture are depreciated using the straight-line method over estimated useful lives
ranging from five to ten years.



Repair and maintenance costs
are expensed as incurred.



Intangible Assets



Intangible assets consist primarily of telephone line capacity, wireless
licenses, goodwill and other intangible assets. VimpelCom capitalizes payments made to third party suppliers to acquire access to and for use of telephone lines (telephone line capacity). These payments are accounted for as intangible assets and are
amortized on a straight-line basis over ten years. Licenses are amortized on a straight-line basis until the expiration date of the licenses. Goodwill represents the excess of consideration paid over the fair value of net assets acquired in purchase
business combinations. In 2001, goodwill was amortized using the straight-line method over estimated remaining useful life. With the adoption of SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142), as of January 1, 2002, no
amortization was taken on goodwill in 2003 and 2002. Other intangible assets are amortized on a straight-line basis over their estimated useful lives, generally from four to ten years.



F-10



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In accordance with SFAS No. 142, VimpelCom continues to evaluate the amortization period for
intangible assets with finite lives to determine whether events or circumstances warrant revised amortization periods. In accordance with SFAS No. 142, VimpelCom tests goodwill for impairment on an annual basis. Additionally, goodwill is tested for
impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an entity below its carrying value. These events or circumstances would include a significant change in the business
climate, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of the business or other factors.



Software Costs



Under the provision of Statement of Position No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,
VimpelCom capitalizes costs associated with software developed or obtained for internal use when both the preliminary project stage is completed and VimpelCom management has authorized further funding of the project which it deems probable will be
completed and used to perform the function intended. Capitalization of such costs ceases no later than the point at which the project is substantially complete and ready for its intended purpose.



Research and development costs and other computer software maintenance costs
related to software development are expensed as incurred. Capitalized software development costs are amortized using the straight-line method over the expected life of the product.



Long-Lived Assets



VimpelCom accounts for impairment of long-lived assets, except for goodwill, in accordance with the provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.



Revenue Recognition



VimpelCom earns service revenues for usage of its cellular system, which
include airtime charges from contract and prepaid subscribers, monthly contract fees, roaming charges and charges for value added services. Roaming revenues include revenues from VimpelCom customers who roam outside their selected home coverage area
and revenues from other wireless carriers for roaming by their customers on VimpelComs network. Value added services include short messages (SMS), caller number identification, voice mail, call waiting and data transmission.
Generally, these features generate additional revenues through monthly subscription fees or increased wireless usage through utilization of the features. Service revenue is generally recognized when the services (including value added services and
roaming revenue) are rendered. Revenue on prepaid cards is deferred and recognized when services are rendered. Revenues from equipment sales are recognized in the period in which the equipment is sold. Revenues are stated net of value-added tax and
sales tax charged to customers.



VimpelCom determined that the
sale of wireless services through VimpelComs direct sales channel with an accompanying handset constitutes a revenue arrangement with multiple deliverables. Upon adoption of EITF No. 00-21, VimpelCom allocates the arrangement consideration to
the separate units of accounting, including the wireless service and handset, based on their relative fair values.



F-11



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In accordance with the provisions of the US SEC Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition in Financial Statements, VimpelCom defers telecommunications connection fees. The deferral of revenue is recognized over the estimated average subscriber life, which is generally two years.



Advertising



VimpelCom expenses the cost of advertising as incurred. Advertising expenses for the years ended December 31, 2003, 2002 and
2001 were US$50,019, US$30,450 and US$21,829, respectively.



Rent



VimpelCom leases office space and premises where
telecommunications equipment is installed. There were no non-cancelable operating leases in 2003 and 2002.



Rent expense under all operating leases and rental contracts in 2003, 2002 and 2001 was US$37,556, US$18,152, and US$9,656, respectively.



Deferred Taxes



VimpelCom computes and records income tax in accordance with SFAS No. 109, Accounting for Income Taxes. Under
the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases.



Government Pension Fund



VimpelCom contributes to the Russian Federation state pension fund on behalf
of its employees. VimpelComs contribution was expensed as incurred. Total amounts expensed in connection with contributions to the state pension fund for the years ended December 31, 2003, 2002 and 2001 were US$13,682, US$7,668 and US$5,037,
respectively.



Business Combinations



VimpelCom accounts for its business acquisitions under the purchase method
of accounting. The total cost of acquisitions is allocated to the underlying assets, including intangible assets, and liabilities based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed
requires managements judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, among other items.



Concentration of Credit Risk



Trade accounts receivable consist of amounts due from subscribers for
airtime usage and amounts due from dealers and subscribers for equipment sales. In certain circumstances, VimpelCom requires deposits as collateral for airtime usage. In addition, VimpelCom has introduced a prepaid service for both DAMPS and GSM
networks. Equipment sales are typically paid in advance of delivery, except for equipment sold to dealers on credit terms. VimpelComs credit risk arising from its trade accounts receivable from subscribers is mitigated due to the large number
of its subscribers, of which approximately 87% subscribed to a prepaid service as of December 31, 2003 and, accordingly, do not give rise to credit risk. VimpelComs credit risk arising from its trade accounts receivable from dealers is
mitigated due to the large number of dealers. Management periodically reviews the history of payments and credit worthiness of the dealers.



VimpelCom deposits available cash with financial institutions in the Russian Federation. Deposit insurance is not offered to financial institutions
operating in Russia. To manage this credit risk, VimpelCom allocates its available cash, mainly in US dollars, to a variety of Russian banks and Russian affiliates of international banks. Management periodically reviews the credit worthiness of the
banks in which it deposits cash.



F-12



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Input value added tax (VAT), representing amounts payable or paid to suppliers, is recoverable from
the tax authorities via offset against VAT payable to the tax authorities on VimpelComs revenue or direct cash receipts from the tax authorities. Management periodically reviews the recoverability of the balance of input value added tax and
believes it is fully recoverable within one year.



VimpelCom
issues advances to a variety of vendors of property and equipment for its network development. The contractual arrangements with the most significant vendors (Alcatel, Ericsson and Technoserve A/S) provide for equipment financing in respect of
certain deliveries of equipment. VimpelCom periodically reviews the financial position of vendors and their compliance with the contract terms.



Fair Value of Financial Instruments



The carrying amounts for financial instruments, consisting of cash and cash equivalents, trade accounts receivable, forward agreement and obligations
under accounts payable approximate their fair value.



The fair
value of senior convertible notes (based on quoted market prices), bank loans, equipment financing obligations and rouble denominated bonds (based on future cash flows discounted at current market rates) were as follows at December 31:



|                                   |  |      |         |      |     |        
|---------------------------------- |  | ---- | ------- | ---- | --- | -------
|                                   |  | 2003 |         | 2002
|Senior convertible notes           |  | US$  |        |      | US$ | 106,266
|Rouble denominated bonds           |  |      | 103,430 |      |     |       
|Sberbank loan to VimpelCom-Region  |  |      | 76,425  |      |     | 39,380 
|Sberbank loan to VimpelCom         |  |      | 16,760  |      |     | 51,000 
|J.P. Morgan AG                     |  |      | 271,759 |      |     | 262,947
|Technoserve A/S  VimpelCom-Region |  |      | 19,263  |      |     | 10,981 
|Technoserve A/S  VimpelCom        |  |      | 2,859   |      |     | 4,002  
|General DataCom                    |  |      | 4,382   |      |     | 6,257  



Comprehensive Income



SFAS No. 130, Reporting Comprehensive Income,
requires the reporting of comprehensive income in addition to net income. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in
the calculation of net income but as an adjustment to shareholders equity.



For the years ended December 31, 2003, 2002 and 2001, comprehensive income for VimpelCom comprised US$236,428, US$129,552 and US$47,301, respectively. Comprehensive income for the years ended December 31, 2003, 2002
and 2001 included net income in the amount of US$233,962, US$129,552 and US$47,301, respectively, and other comprehensive income (foreign currency translation adjustment) in the amount of US$2,466, US$0 and US$0, respectively, net of minority
interest in the amount of US$1,993, US$0 and US$0, respectively, and net of tax in the amount of US$969, US$0 and US$0, respectively.



Accounting for Sales of Stock by a Subsidiary



VimpelCom follows the provisions of SAB No. 51, Accounting for Sales of Stock by a Subsidiary. SAB No. 51 allows accounting for issuance of
stock by a subsidiary as a capital transaction. VimpelCom includes gain on the sale of newly issued stock of subsidiaries in additional paid-in capital in the consolidated financial statements.



F-13



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Stock-Based Compensation



VimpelCom follows the provisions of SFAS No. 123, Accounting for Stock-Based Compensation, for its stock option
plan. SFAS No. 123 generally allows companies to either account for stock-based compensation under the provisions of SFAS No. 123 or under the provisions of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock
Issued to Employees, and to make disclosures in accordance with the provisions of SFAS No. 148 Accounting for Stock-Based Compensation  Transition and Disclosure  an amendment of SFAS No. 123. Because the fair value
accounting requires use of option valuation models that were not developed for use in valuing employee stock options (see Note 26), VimpelCom has elected to account for its stock-based compensation in accordance with the provisions of APB No. 25 and
related Interpretations and present pro forma disclosures of results of operations as if the fair value method had been adopted.



The following table illustrates the effect on net income and earnings per share if VimpelCom had applied the fair value recognition provisions of SFAS No.
123, to stock-based employee compensation.



|                                                                                                                          |  |                          |         |   |      |     |         |      |  |     |        |  
|------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | --- | ------- | ---- |  | --- | ------ | -
|                                                                                                                          |  | Years ended December 31, |        
|                                                                                                                          |  | 2003                     |         |   | 2002 |     |         | 2001 | 
|Net income, as reported                                                                                                   |  | US$                      | 233,962 |   |      | US$ | 129,552 |      |  | US$ | 47,301 |  
|Add: Compensation expense in respect of 2000 Stock Option Plan, as reported                                               |  |                          | 5,381   |   |      |     | 4,085   |      |  |     |       |  
|Deduct: Compensation expense in respect of 2000 Stock Option Plan determined under fair value based method for all awards |  |                          | (1,230  | ) |      |     | (1,386  | )    |  |     | (1,363 | )
|                                                                                                                          |  |                          |         |   |      |     |         |      |  |     |        |  
|Pro forma net income                                                                                                      |  | US$                      | 238,113 |   |      | US$ | 132,251 |      |  | US$ | 45,938 |  
|                                                                                                                          |  |                          |         |   |      |     |         |      |  |     |        |  
|Earnings per share:                                                                                                       |  |                          |         |   |      |     |         |      |  |     |        |  
|Basic  as reported                                                                                                       |  | US$                      | 6.12    |   |      | US$ | 3.41    |      |  | US$ | 1.41   |  
|Basic  pro forma                                                                                                         |  | US$                      | 6.23    |   |      | US$ | 3.48    |      |  | US$ | 1.37   |  
|Diluted  as reported                                                                                                     |  | US$                      | 5.22    |   |      | US$ | 2.91    |      |  | US$ | 1.18   |  
|Diluted  pro forma                                                                                                       |  | US$                      | 5.31    |   |      | US$ | 2.97    |      |  | US$ | 1.15   |  



Derivative Instruments and Hedging
Activities



SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, requires companies to recognize all of their derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value of a
derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging
instruments, VimpelCom designates the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.



For derivative instruments that are designated and qualify as a fair value
hedge, the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in the same line item associated with the hedged item in current earnings during the period
of the change in fair values. If the derivative instrument either initially fails or later ceases to qualify as a fair value hedge, any subsequent gains or losses are recognized in income.



Accounting for Assets Retirement Obligations



In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This statement deals with the costs of closing facilities and removing assets. SFAS No. 143 requires entities to record



F-14



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



the fair value of a legal liability for an asset retirement obligation in the period it is incurred. This cost is initially capitalized and amortized over
the remaining life of the asset. Once the obligation is ultimately settled, any difference between the final cost and the recorded liability is recognized as a gain or loss on disposition. SFAS No. 143 is effective for years beginning after June 15,
2002. VimpelCom adopted SFAS No. 143 effective January 1, 2003.



VimpelCom has certain legal obligations related to rented sites for base stations, which fall within the scope of SFAS 143. These legal obligations include obligations to remediate leased land on which base stations are located. In
connection with the adoption of this standard, VimpelCom recorded the cumulative effect of accounting change that decreased 2003 net income by US$327, net of tax and minority interest, an initial asset retirement obligation of approximately
US$2,305, and capitalized US$1,806 by increasing the carrying value of the related asset.



For the year ended December 31, 2003, the capitalized costs were depreciated by approximately US$296, and approximately US$209 of accretion expense was recorded to increase the asset retirement obligation to its
present value. The accretion expense was included in depreciation in the accompanying statement of income.



The following unaudited pro forma combined results of operations for VimpelCom give effect to adoption of SFAS 143 as if it had occurred at the beginning
of 2001. These pro forma amounts are provided for information purposes only and do not purport to present the results of operations of VimpelCom had the transactions assumed therein occurred on or as of the date indicated, nor is it necessarily
indicative of the results of operations which may be achieved in the future.



|                                              |  |                          |         |      |     |         |  |     |       
|--------------------------------------------- |  | ------------------------ | ------- | ---- | --- | ------- |  | --- | ------
|                                              |  | Years ended December 31,
|                                              |  | 2003                     |         | 2002 |     | 2001   
|Pro forma net income                          |  | US$                      | 234,289 |      | US$ | 129,405 |  | US$ | 47,204
|Pro forma basic net income per common share   |  |                          | 6.13    |      |     | 3.40    |  |     | 1.40  
|Pro forma diluted net income per common share |  |                          | 5.23    |      |     | 2.91    |  |     | 1.18  



Accounting for Costs Associated
with Exit or Disposal Activities



In June 2002, the FASB
issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This statement
nullifies Emerging Issues Task Force No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring), which required that a liability for
an exit cost be recognized upon the entitys commitment to an exit plan. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of the provisions of SFAS No. 146 did not have a
material impact on VimpelComs results of operations, financial position or cash flow.



Accounting for Guarantees



In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 requires
that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. The disclosure provisions of FIN No. 45 are effective for financial statements of annual periods that
end after December 15, 2002. The provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002. The adoption of the provisions of FIN No. 45 did not have a
material impact on VimpelComs results of operations, financial position or cash flow.



F-15



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Consolidation of Variable Interest Entities



In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities. FIN No. 46 amended
Accounting Research Bulletin No. 51, Consolidated Financial Statements, and established standards for determining under what circumstances a variable interest (VIE) should be consolidated with its primary beneficiary. FIN No.
46 also requires disclosure about VIEs that are not required to be consolidated but in which the reporting entity has a significant variable interest. In December 2003, the FASB revised certain implementation provisions of FIN No. 46. The revised
interpretation (FIN No. 46R) substantially retained the requirements of immediate application of FIN No. 46 to VIEs created after January 31, 2003. With respect to older VIEs, the consolidation requirements under FIN No. 46R apply not
later than for the first financial year or interim period ending after December 15, 2003, if such a VIE is a special-purpose entity (SPE), and no later than for the first financial year or interim period ending after March 15, 2004, if
such a VIE is not an SPE.



VimpelCom completed an evaluation of
this guidance and concluded that the adoption of the provisions of FIN No. 46 did not have a material impact on its consolidated financial statements and is not expected to have a material impact on its consolidated financial statements when it is
fully implemented in 2004.



Revenue Arrangements with Multiple Deliverables



In July 2000, the EITF of the FASB issued EITF 00-21
Revenue Arrangements with Multiple Deliverables. EITF 00-21 provides guidance for determining the unit(s) of accounting in arrangements that include multiple products, services, and/or rights to use assets. The guidance provided in EITF
00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption of the provisions of EITF 00-21 did not have a material impact on VimpelComs results of operations, financial position or
cash flow.



Amendment to SFAS 133 on Derivative Instruments and Hedging
Activities



In April 2003, the FASB issued SFAS No. 149,
Amendment to Statement 133 on Derivative Instruments and Hedging Activities. This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities. It is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated
after June 30, 2003. All provisions of the Statement should be applied prospectively, except as stated further. Provisions related to SFAS 133 Implementation Issues that have been effective for fiscal quarters beginning prior to June 15, 2003,
should continue to be applied in accordance with their respective dates. Rules related to forward purchases or sales of when-issued securities or other similar securities, should be also applied to existing contracts. The adoption of the provisions
of SFAS No. 149 did not have a material impact on VimpelComs results of operations, financial position or cash flow.



Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The adoption of the provisions of SFAS No. 150 did not have a material impact on VimpelComs results of operations, financial position or cash flow.



F-16



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Reclassifications



Certain reclassifications have been made to the prior years consolidated financial statements to conform to the current year presentation. Input VAT
was presented separately from other current assets. Taxes payable and amounts due to employees were presented separately from accrued liabilities. Customer deposits and customer advances were presented separately from each other.



|3. | REVENUE-BASED TAXES
|-- | -------------------



Revenue-based taxes represented road users tax charged on revenues at a 1% rate. Effective January 1, 2003, certain changes were introduced in Russian tax
legislation resulting in the road users tax being abolished.



|4. | CHANGES IN ESTIMATES
|-- | --------------------



At the beginning of fiscal year 2002, VimpelCom changed the estimated remaining useful life of DAMPS telecommunications equipment from 6.5 to 4 years. The
change decreased net income for the year ended December 31, 2002 by approximately US$3,152 equivalent to US$0.08 per share of common stock  basic and US$0.07 per share of common stock  diluted.



At the beginning of the second quarter 2002, VimpelCom changed the estimated
remaining useful life of NAMPS telecommunications equipment from 4.25 to 1.75 years. The change decreased net income for the year ended December 31, 2002 by approximately US$1,752 equivalent to US$0.05 per share of common stock  basic and
US$0.04 per share of common stock  diluted.



At the
beginning of the third quarter 2002, VimpelCom changed the estimated remaining useful life of certain items of telecommunications equipment from 5 to 0.5 years. The change decreased net income for the year ended December 31, 2002 by approximately
US$2,239 equivalent to US$0.06 per share of common stock  basic and US$0.05 per share of common stock  diluted.



At the beginning of the fourth quarter 2002, VimpelCom changed the estimated remaining useful life of certain items of telecommunications equipment from 5
to 0.25 years. The change decreased net income for the year ended December 31, 2002 by approximately US$1,857 equivalent to US$0.05 per share of common stock  basic and US$0.04 per share of common stock  diluted.



At the beginning of fiscal year 2003, as a result of the ongoing technical
inspection of telecommunications equipment, VimpelCom changed the estimated remaining useful life of certain items of telecommunications equipment from 5 to 0.25 years. The change decreased net income for the year ended December 31, 2003 by
approximately US$810, equivalent to US$0.02 per share of common stock  basic and US$0.02 per share of common stock  diluted.



At the beginning of the third quarter 2003, VimpelCom changed the estimated remaining useful life of DAMPS telecommunications equipment from 2.5 to 1
year. The change decreased net income for the year ended December 31, 2003 by approximately US$4,626 equivalent to US$0.12 per share of common stock  basic and US$0.10 per share of common stock  diluted.



|5. | ACQUISITIONS
|-- | ------------



In July 2002, VimpelCom-Region acquired 77.6% of common stock of Orensot, a cellular communication enterprise operating in the Orenburg region, for
US$14,204. In October 2002, VimpelCom-Region acquired 21.21% of Orensots common stock, which VimpelCom-Region did not previously own, for US$3,882. This



F-17



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



transaction increased VimpelCom-Regions ownership in Orensot to 98.81%. The acquisitions were recorded under the purchase method of accounting. The
results of operations of Orensot were included in the accompanying consolidated statement of income from the date of acquisition. The fair value of net assets acquired approximated the cost of acquisition.



In December 2002, VimpelCom-Region acquired 100% of Extel, a cellular
communication enterprise operating in the Kaliningrad region, for US$25,312. The acquisition was recorded under the purchase method of accounting. The results of operations of Extel were included in the accompanying consolidated statement of income
from the date of acquisition. The fair value of net assets acquired approximated the cost of acquisition.



In December 2002, VimpelCom-Region acquired 100% of ownership interest in Vostok-Zapad Telecom, a company that holds a GSM-900/1800 license for operations
in the Ural region, for US$26,608. The acquisition was recorded under the purchase method of accounting. The results of operations of Vostok-Zapad Telecom were included in the accompanying consolidated statement of operations from the date of
acquisition. The fair value of net assets acquired approximated the cost of acquisition.



In January 2003, VimpelCom-Region acquired 90% of common stock of StavTeleSot, a cellular operator in the Stavropol region, for US$38,801. The primary reason for the acquisition was obtaining the frequencies allocated
to StavTeleSot under its mobile telecommunications license. The acquisition was recorded under the purchase method of accounting. The results of operations of StavTeleSot were included in the accompanying consolidated statement of income from the
date of acquisition. The fair value of net assets acquired comprised US$43,500. The difference of US$4,699 between the amount paid and the fair value of net assets acquired was allocated as pro rata reduction of the acquired license, allocation of
frequencies and property and equipment.



The following table
presents the condensed balance sheet disclosing the amount assigned to each major asset and liability caption of StavTeleSot at the acquisition date.



|                                                                                                                  |  |     |         |  
|----------------------------------------------------------------------------------------------------------------- |  | --- | ------- | -
|Cash and cash equivalents                                                                                         |  | US$ | 658     |  
|Other current assets                                                                                              |  |     | 6,260   |  
|Property and equipment, net                                                                                       |  |     | 29,620  |  
|Telecommunications licenses and allocation of frequencies, net (4.2 years weighted-average remaining useful life) |  |     | 26,780  |  
|Other intangible assets, net (4.2 years weighted-average remaining useful life)                                   |  |     | 209     |  
|Other assets                                                                                                      |  |     | 219     |  
|Current liabilities                                                                                               |  |     | (15,103 | )
|Long-term liabilities                                                                                             |  |     | (2,625  | )
|Deferred income taxes                                                                                             |  |     | (4,900  | )
|                                                                                                                  |  |     |         |  
|Fair value of net assets acquired                                                                                 |  |     | 41,118  |  
|Minoritys share in net assets                                                                                    |  |     | (2,317  | )
|                                                                                                                  |  |     |         |  
|Total investment                                                                                                  |  | US$ | 38,801  |  
|                                                                                                                  |  |     |         |  



On September 19, 2003,
VimpelCom-Region increased its share of ownership in StavTeleSot to 100% by acquiring the remaining 10% of StavTeleSot common stock, which VimpelCom-Region did not previously own, for US$4,312. The acquisition was recorded under the purchase method
of accounting. The fair value of 10% of net assets acquired approximated the cost of acquisition.



F-18



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following unaudited pro forma combined results of operations for VimpelCom give effect to
StavTeleSot business combination transactions as if they had occurred at the beginning of 2002. These pro forma amounts are provided for information purposes only and do not purport to present the results of operations of VimpelCom had the
transactions assumed therein occurred on or as of the date indicated, nor is it necessarily indicative of the results of operations which may be achieved in the future.



|                                                                                             |  |                          |           |      |     |        
|-------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | ---- | --- | -------
|                                                                                             |  | Years ended December 31,
|                                                                                             |  | 2003                     |           | 2002
|Pro forma total operating revenues                                                           |  | US$                      | 1,338,611 |      | US$ | 797,076
|Pro forma net income before cumulative effect of changes in accounting principle, net of tax |  |                          | 235,255   |      |     | 138,572
|Pro forma net income                                                                         |  |                          | 234,928   |      |     | 138,572
|Pro forma basic net income per common share                                                  |  |                          | 6.14      |      |     | 3.65   
|Pro forma diluted net income per common share                                                |  |                          | 5.24      |      |     | 3.11   



|6. | CASH AND CASH EQUIVALENTS
|-- | -------------------------



Cash and cash equivalents consisted of the following at December 31:



|                          |  |      |         |      |     |        
|------------------------- |  | ---- | ------- | ---- | --- | -------
|                          |  | 2003 |         | 2002
|Rubles                    |  | US$  | 67,991  |      | US$ | 40,185 
|US dollars                |  |      | 62,098  |      |     | 182,815
|EURO and other currencies |  |      | 27,522  |      |     | 40,657 
|                          |  |      |         |      |     |        
|                          |  | US$  | 157,611 |      | US$ | 263,657
|                          |  |      |         |      |     |        



|7. | OTHER CURRENT ASSETS
|-- | --------------------



Other current assets consisted of the following at December 31:



|                                            |  |      |        |      |     |       
|------------------------------------------- |  | ---- | ------ | ---- | --- | ------
|                                            |  | 2003 |        | 2002
|Advances to suppliers                       |  | US$  | 20,720 |      | US$ | 15,194
|Forward agreement (Note 8)                  |  |      | 10,135 |      |     | 2,639 
|Taxes                                       |  |      | 2,004  |      |     | 3,197 
|Prepayment under forward agreement (Note 8) |  |      |       |      |     | 2,041 
|Other                                       |  |      | 8,354  |      |     | 9,956 
|                                            |  |      |        |      |     |       
|                                            |  | US$  | 41,213 |      | US$ | 33,027
|                                            |  |      |        |      |     |       



|8. | FORWARD AGREEMENTS
|-- | ------------------



VimpelCom entered into forward exchange contracts to hedge certain liabilities denominated in foreign currencies. The purpose of VimpelComs foreign
currency hedging activities is to protect VimpelCom from risk that the eventual dollar cash outflows from payments in euros to vendors of equipment will be adversely affected by changes in the exchange rates.



Forward Agreements with Citibank



On May 14, 2002, VimpelCom entered into a forward agreement with Citibank
for purchase of EURO 5,000 thousand on November 15, 2002 for US dollars at a rate of 0.897 EURO/1US$ to hedge foreign currency risk



F-19



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



associated with the liability under equipment financing agreements between KBI and Alcatel SEL AG (Alcatel). The agreement qualified as a fair
value hedge under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. VimpelCom purchased EURO 5,000 thousand on November 15, 2002. The net gain of US$542 related to the change in the fair value of the
derivative from May 14, 2002 to November 15, 2002 was included in net foreign exchange loss in the accompanying consolidated statement of income for the year ended December 31, 2002.



On August 26, 2002, KBI entered into a forward agreement with Citibank for purchase of EURO 89,912 thousand for US dollars
at a rate of 0.9599 EURO/1US$ in several installments during the period from January 2003 to January 2006 to hedge foreign currency risk associated with the liability under equipment financing agreements between KBI and Alcatel. The agreement
qualified as a fair value hedge under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The derivative was recorded at fair value of US$14,018 and US$6,222 as of December 31, 2003 and 2002, and
included in other current assets in the amount of US$9,315 and US$2,639, respectively, and in other assets in the amount of US$4,703 and US$3,583, respectively, in the accompanying consolidated balance sheets (Notes 7, 12). The net gain of US$13,543
and US$6,222 related to the change in the fair value of the derivative was included in net foreign exchange loss in the accompanying consolidated statements of income for the years ended December 31, 2003 and 2002, respectively.



In accordance with the forward agreement, KBI made a prepayment in the amount
of US$8,000 with Citibank. As of December 31, 2002, the deposit was recorded as other current assets and other assets in the amount of US$2,041 and US$5,959, respectively. As of December 31, 2003, this deposit was fully used (Notes 7, 12).



Forward Agreements with Standard Bank



In June 2003, VimpelCom-Region entered into a forward agreement with
Standard Bank for the purchase of EURO 2,893 thousand for US dollars at a rate of 1.1461 US$/1EURO in several installments during the period from August 2003 to June 2005, EURO 2,722 thousand for US dollars at a rate of 1.1455 US$/1EURO in several
installments during the period from August 2003 to September 2005, and EURO 11,700 thousand for US dollars at a rate of 1.1660 US$/1EURO in November 2003 to hedge foreign currency risk associated with the liability under equipment financing
agreements between VimpelCom-Region and Alcatel, and between VimpelCom-Region and LLC Technoserve A/S (Technoserve). In November 2003, VimpelCom-Region entered into a forward agreement with Standard Bank for the purchase of EURO 12,331
thousand for US dollars at a rate of 1.1526 US$/1EURO in several installments during the period from December 2003 to December 2005 to hedge foreign currency risk associated with the liability under equipment financing agreements between
VimpelCom-Region and Alcatel, and between VimpelCom-Region and Technoserve. These agreements qualified as a fair value hedge under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The derivatives
were recorded at fair value of US$1,456 as of December 31, 2003, and included in other current assets and other assets in the amount of US$820 and US$636, respectively. The net gain of US$1,507 related to the change in the fair value of the
derivatives was included in net foreign exchange loss in the accompanying consolidated statement of income for the year ended December 31, 2003.



F-20



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|9. | PROPERTY AND EQUIPMENT
|-- | ----------------------



Property and equipment, at cost, except for impaired assets, consisted of the following at December 31:



|                                                                 |  |      |           |   |      |     |          |  
|---------------------------------------------------------------- |  | ---- | --------- | - | ---- | --- | -------- | -
|                                                                 |  | 2003 |           |   | 2002 |    
|Telecommunications equipment held under capital lease agreements |  | US$  | 22,152    |   |      | US$ | 8,424    |  
|Telecommunications equipment                                     |  |      | 1,021,572 |   |      |     | 640,295  |  
|Buildings and leasehold improvements                             |  |      | 48,170    |   |      |     | 39,892   |  
|Office and measuring equipment                                   |  |      | 93,915    |   |      |     | 58,951   |  
|Vehicles                                                         |  |      | 6,110     |   |      |     | 4,072    |  
|Furniture                                                        |  |      | 5,128     |   |      |     | 4,470    |  
|Other equipment                                                  |  |      | 4,560     |   |      |     | 4,919    |  
|                                                                 |  |      |           |   |      |     |          |  
|                                                                 |  |      | 1,201,607 |   |      |     | 761,023  |  
|Accumulated depreciation                                         |  |      | (282,224  | ) |      |     | (165,930 | )
|Equipment not installed and assets under construction            |  |      | 541,159   |   |      |     | 362,509  |  
|                                                                 |  |      |           |   |      |     |          |  
|                                                                 |  | US$  | 1,460,542 |   |      | US$ | 957,602  |  
|                                                                 |  |      |           |   |      |     |          |  



VimpelCom capitalized
interest in the cost of telecommunications equipment in the amount of US$3,136, US$1,583 and US$0 in 2003, 2002 and 2001, respectively.



In April 2001, VimpelCom-Region acquired Cellular Company. Cellular Company had telecommunications equipment held under capital lease agreements (Note
17).



In October 2002, VimpelCom acquired controlling ownership
interest in Bee-Line Samara. Bee-Line Samara had telecommunications equipment held under capital lease agreements (Note 17).



In June 2003, VimpelCom leased DAMPS telecommunications equipment from Open Joint Stock Company Investelectrosvyaz, trademark
Corbina, (OJSC Investelectrosvyaz) under the sales-leaseback agreement (Notes 10, 17).



Accumulated depreciation on telecommunications equipment held under capital lease agreements amounted to US$7,127 and US$2,965 at December 31, 2003 and
2002, respectively. Depreciation expense in respect of telecommunications equipment held under capital lease amounted to US$4,162, US$1,977 and US$988 (commencing April 2001) for the years ended December 31, 2003, 2002 and 2001, respectively, and
was included in depreciation expense in the accompanying consolidated statements of operations.



|10. | SALE-LEASEBACK OF DAMPS EQUIPMENT
|--- | ---------------------------------



In June 2003, VimpleCom signed a set of agreements with OJSC Investelectrosvyazon sale-leaseback of certain DAMPS equipment and subsequent
agency relations. The DAMPS equipment was sold and leased back on July 1, 2003. Net book value of the DAMPS equipment sold comprised US$14,606 as of July 1, 2003. The selling price was US$16,500 net of value added tax, payable in two installments.
Gain on transaction, representing the excess of the selling price over the net book value of the DAMPS equipment sold, was deferred and amortised in proportion to the amortization of the leased asset. Unamortised balance of the gain of US$1,768 was
included in deferred revenue in the consolidated balance sheet as of December 31, 2003. OJSC Investelectrosvyaz had paid US$12,432 by December 31, 2003. The second installment is due anytime before April 1, 2004. As of December 31, 2003,
as a collateral for the second payment OJSC Investelectrosvyaz pledged to VimpelCom certain items of the DAMPS equipment with the agreed pledged value of US$4,068. Leased DAMPS equipment under this sale-leaseback agreement was accounted
for as capital lease (Note 17). Under the lease agreement the monthly lease payments comprised US$380.



F-21



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|11. | TELECOMMUNICATIONS LICENSES AND ALLOCATIONS OF FREQUENCIES AND OTHER INTANGIBLE ASSETS
|--- | --------------------------------------------------------------------------------------



The total gross carrying value and accumulated amortization of VimpelComs telecommunications licenses and allocation
of frequencies was as follows:



| |  |                   |  |                         |                   |   |      |     |                         |  |     |         |  
| |  | ----------------- |  | ----------------------- | ----------------- | - | ---- | --- | ----------------------- |  | --- | ------- | -
| |  | December 31, 2003 |  |                         | December 31, 2002 |  
| |  | Cost              |  | Accumulatedamortization |                   |   | Cost |     | Accumulatedamortization | 
| |  | US$139,991        |  | US$                     | (36,174           | ) |      | US$ | 101,826                 |  | US$ | (13,441 | )



Telecommunications
licenses and allocations of frequencies acquired directly by VimpelCom were initially recorded at cost. Telecommunications licenses and allocations of frequencies acquired in business combinations were initially recorded at their fair value as of
the acquisition date.



The total gross carrying value and
accumulated amortization of VimpelComs intangible assets by major intangible asset class was as follows:



|                        |  |                   |         |                         |                   |         |      |  |                         |         |  |     |         |  
|----------------------- |  | ----------------- | ------- | ----------------------- | ----------------- | ------- | ---- |  | ----------------------- | ------- |  | --- | ------- | -
|                        |  | December 31, 2003 |         |                         | December 31, 2002 |        
|                        |  | Cost              |         | Accumulatedamortization |                   |         | Cost |  | Accumulatedamortization |        
|Telephone line capacity |  | US$               | 102,107 |                         | US$               | (56,087 | )    |  | US$                     | 89,826  |  | US$ | (45,487 | )
|Goodwill                |  |                   | 9,816   |                         |                   |        |      |  |                         | 9,816   |  |     |        |  
|Other intangible assets |  |                   | 7,840   |                         |                   | (4,307  | )    |  |                         | 3,439   |  |     | (1,864  | )
|                        |  |                   |         |                         |                   |         |      |  |                         |         |  |     |         |  
|                        |  | US$               | 119,763 |                         | US$               | (60,394 | )    |  | US$                     | 103,081 |  | US$ | (47,351 | )
|                        |  |                   |         |                         |                   |         |      |  |                         |         |  |     |         |  



Amortization expense
for each of the succeeding five years is expected to be as follows:



|           |  |     |       
|---------- |  | --- | ------
|2004       |  | US$ | 34,826
|2005       |  |     | 34,826
|2006       |  |     | 31,812
|2007       |  |     | 21,790
|2008       |  |     | 13,266
|Thereafter |  |     | 16,850



F-22



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The pro forma impact of non-amortization of goodwill on net income and net income per share for the
year ended December 31, 2001 compared to actual results for the years ended December 31, 2003 and 2002 is as follows:



|                                     |  |                                                         |         |      |     |         |  |     |       
|------------------------------------ |  | ------------------------------------------------------- | ------- | ---- | --- | ------- |  | --- | ------
|                                     |  | Years ended December 31,                               
|                                     |  | 2003                                                    |         | 2002 |     | 2001   
|                                     |  | (In thousands of U.S. dollars, except per shareamounts)
|Reported net income                  |  | US$                                                     | 233,962 |      | US$ | 129,552 |  | US$ | 47,301
|Goodwill amortization                |  |                                                         |        |      |     |        |  |     | 1,621 
|                                     |  |                                                         |         |      |     |         |  |     |       
|Adjusted net income                  |  | US$                                                     | 233,962 |      | US$ | 129,552 |  | US$ | 48,922
|                                     |  |                                                         |         |      |     |         |  |     |       
|Basic net income per common share:   |  |                                                         |         |      |     |         |  |     |       
|Reported net income                  |  | US$                                                     | 6.12    |      | US$ | 3.41    |  | US$ | 1.41  
|Goodwill amortization                |  |                                                         |        |      |     |        |  |     | 0.04  
|                                     |  |                                                         |         |      |     |         |  |     |       
|Adjusted net income per common share |  | US$                                                     | 6.12    |      | US$ | 3.41    |  | US$ | 1.45  
|                                     |  |                                                         |         |      |     |         |  |     |       
|Diluted net income per common share: |  |                                                         |         |      |     |         |  |     |       
|Reported net income                  |  | US$                                                     | 5.22    |      | US$ | 2.91    |  | US$ | 1.18  
|Goodwill amortization                |  |                                                         |        |      |     |        |  |     | 0.04  
|                                     |  |                                                         |         |      |     |         |  |     |       
|Adjusted net income per common share |  | US$                                                     | 5.22    |      | US$ | 2.91    |  | US$ | 1.22  
|                                     |  |                                                         |         |      |     |         |  |     |       



|12. | OTHER ASSETS
|--- | ------------



Other assets consisted of the following at December 31:



|                                               |  |      |         |   |      |     |         |  
|---------------------------------------------- |  | ---- | ------- | - | ---- | --- | ------- | -
|                                               |  | 2003 |         |   | 2002 |    
|Software, at cost                              |  | US$  | 126,965 |   |      | US$ | 54,681  |  
|Accumulated depreciation                       |  |      | (29,546 | ) |      |     | (10,867 | )
|                                               |  |      |         |   |      |     |         |  
|                                               |  |      | 97,419  |   |      |     | 43,814  |  
|Prepayments to suppliers for long-lived assets |  |      | 34,684  |   |      |     | 36,309  |  
|Prepayment under forward agreement (Note 8)    |  |      |        |   |      |     | 5,959   |  
|Forward agreement (Note 8)                     |  |      | 5,339   |   |      |     | 3,583   |  
|Equity investments                             |  |      | 2,498   |   |      |     | 1,556   |  
|Other assets                                   |  |      | 6,406   |   |      |     | 1,283   |  
|                                               |  |      |         |   |      |     |         |  
|                                               |  | US$  | 146,346 |   |      | US$ | 92,504  |  
|                                               |  |      |         |   |      |     |         |  



|13. | BANK LOANS
|--- | ----------



Bank loans consisted of the following as of December 31:



|                                    |  |      |         |   |      |     |         |  
|----------------------------------- |  | ---- | ------- | - | ---- | --- | ------- | -
|                                    |  | 2003 |         |   | 2002 |    
|J.P. Morgan AG                      |  | US$  | 250,000 |   |      | US$ | 250,000 |  
|Sberbank  loan to VimpelCom-Region |  |      | 70,000  |   |      |     | 39,380  |  
|Nordea                              |  |      | 24,899  |   |      |     |        |  
|Sberbank  loan to VimpelCom        |  |      | 16,700  |   |      |     | 50,100  |  
|Other loans                         |  |      | 3,856   |   |      |     | 4,380   |  
|                                    |  |      |         |   |      |     |         |  
|                                    |  |      | 365,455 |   |      |     | 343,860 |  
|Less current portion                |  |      | (35,343 | ) |      |     | (37,780 | )
|                                    |  |      |         |   |      |     |         |  
|Total long-term bank loans          |  | US$  | 330,112 |   |      | US$ | 306,080 |  
|                                    |  |      |         |   |      |     |         |  



F-23



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On April 26, 2002, the offering of 10.45% Loan Participation Notes (Notes) issued by, but
without recourse to J.P. Morgan AG, for the sole purpose of funding a US$250,000 loan to VimpelCom was completed. The loan will mature on April 26, 2005. VimpelCom is to pay cash interest on the loan at the rate of 10.45% per annum from April 26,
2002, payable semi-annually on April 26 and October 26 of each year. Such interest payments commenced on October 26, 2002. As of December 31, 2003, interest in amount of US$4,716 was accrued. Gross issuance costs comprised US$6,569 and were
included, net of related accumulated amortization of US$3,675, in unamortized debt issue costs in the accompanying consolidated balance sheet. Amortization of debt issuance costs is included in interest expense in the accompanying consolidated
financial statements. Under the loan agreement between VimpelCom and J.P. Morgan AG, VimpelCom is subject to certain defined debt covenant restrictions, including several restrictions related to financial condition.



In December 2002, Sberbank provided a US dollar denominated credit line of
US$70,000 to VimpelCom-Region. VimpelCom-Region had the right to draw down the entire amount before April 1, 2003. VimpelCom-Region has made drawings under the credit line in the total amount of US$70,000. The loan will be repaid in twelve
installments, on a quarterly basis, commencing November 27, 2004. The interest rate as at the date of signing was 13% per annum and is subject to change by Sberbank. As of December 31, 2003, the interest rate was 11.5% per annum.



As of December 31, 2003, assets pledged as collateral against the loan from
Sberbank to VimpelCom-Region included certain items of telecommunications equipment with an approximate carrying amount of US$72,691 and promissory notes issued by VimpelCom-Region to Cellular Company with a nominal amount of 1,576,000 thousand
rubles (US$53,514 at exchange rate as of December 31, 2003).



VimpelCom irrevocably, fully and unconditionally guaranteed VimpelCom-Regions obligations under the loan from Sberbank for the total amount of US$50,000.



On January 15, 2003, Nordea Bank Sweden AB provided a US dollar denominated credit line of US$35,700 to VimpelCom. In 2003,
VimpelCom made three drawings under the credit line in the amount of US$16,497, US$3,433 and US$13,936 on March 2, 2003, April 25, 2003 and December 5, 2003, respectively. Each of the tranche is to be repaid in six equal installments, on a
semi-annual basis, commencing April 27, 2003. The loan bears interest at an annual rate of LIBOR rate plus 0.7%.



As of December 31, 2003, assets pledged as collateral against the credit line from Nordea Bank Sweden AB included certain items of telecommunications
equipment with an approximate carrying amount of US$39,041.



On
April 28, 2000, Sberegatelny Bank of the Russian Federation (Sberbank) provided a four-year, US dollar denominated, credit line of US$80,000 to VimpelCom. The amount of the credit line was subsequently reduced to US$66,800. VimpelCom had
the right to draw down the entire amount before April 28, 2001. VimpelCom has made drawings under the credit line in the total amount of US$66,800. The loan is to be repaid in eight equal installments, on a quarterly basis, commencing July 10, 2002.
The interest rate as at the date of signing was 13.25% per annum and is subject to change by Sberbank. As of December 31, 2003, the interest rate was 9.5% per annum.



As of December 31, 2003, assets pledged as collateral against this credit line included certain items of telecommunications
equipment and buildings in Moscow owned by VimpelCom with an approximate carrying amount of US$20,127 and US$1,045, respectively, all of VimpelComs shares in MSS Start, 50% of shares in Bee-Line Samara. The carrying amount of 50% of net assets
of Bee-Line Samara in the accompanying consolidated balance sheet as of December 31, 2003 was US$7,859. The carrying amount of net assets of MSS



F-24



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Start in the accompanying consolidated balance sheet as of December 31, 2003 was US$1,646. Under the loan agreement between VimpelCom and Sberbank, VimpelCom
is subject to certain defined debt covenant restrictions, including several restrictions related to financial condition.



On April 7, 2003, Raiffeisenbank Austria provided a rouble denominated credit line of 640,000 thousand roubles (US$20,459 at exchange rate as of April 7,
2003) to VimpelCom-Region. The loan bore interest at an annual rate of 14%. The principal amount and the accrued interest were fully repaid on May 20, 2003.



|14. | SENIOR CONVERTIBLE NOTES
|--- | ------------------------



On July 28, 2000, the offering of senior convertible notes registered with the SEC raised a total of US$70,320 (net of cost of issuance of US$4,680).
Unamortised balance of debt issue costs of US$0 and US$2,758 was included in non-current assets in the accompanying consolidated balance sheets as of December 31, 2003 and 2002, respectively.



The convertible notes mature on July 28, 2005. Holders of the convertible
notes had the right to convert the notes into ADSs at any time after September 28, 2000 at the conversion price of US$27.0312 per ADS, subject to certain adjustments. VimpelCom was to pay cash interest on the convertible notes at the rate of 5.5%
per annum from July 28, 2000, payable semi-annually on January 28 and July 28 of each. Such interest payments commenced on January 28, 2001. Unless previously converted or redeemed, VimpelCom was to repay the convertible notes at 135.41% of their
principal amount, which represented a yield to maturity of 11% per annum compounded on a semi-annual basis. Amortization of discount on the notes and debt issuance costs was included in interest expense in the accompanying consolidated financial
statements.



The convertible notes were redeemable by VimpelCom
starting from July 28, 2002 at their accreted value, plus accrued but unpaid cash interest and any additional amounts, if the market price of the ADSs on the New York Stock Exchange exceeds 140% of the conversion price during a period of 30
consecutive trading days.



Senior convertible notes were issued
by VimpelCom B.V., a wholly-owned subsidiary of VimpelCom Finance B.V., which is a wholly-owned subsidiary of VimpelCom. VimpelCom B.V. is a company with no assets, operations, revenues or cash flows other than those related to the issuance,
administration and repayment of senior convertible notes.



VimpelCom irrevocably, fully and unconditionally guaranteed VimpelCom B.V.s obligations under the senior convertible notes, including the performance by VimpelCom B.V. of its conversion obligation.



In the third and fourth quarters 2003, senior convertible notes with the
total nominal value of US$74,000 were converted into ADSs at the price of US$27.0312 per ADS (US$36.0416 per share) (Note 18).



In December 2003, senior convertible notes with the total nominal value of US$1,000 plus accrued interest in the amount of US$242 were repaid by
VimpelCom. As of December 31, 2003, Vimpelcom had no obligations under senior convertible notes.



|15. | ROUBLE DENOMINATED BONDS
|--- | ------------------------



On May 20, 2003, VimpelCom-Region issued rouble denominated bonds through VimpelCom Finance, a newly established consolidated ultimate subsidiary of
VimpelCom-Region, in an aggregate principal amount of 3,000,000 thousand roubles (US$101,852 at exchange rate as of December 31, 2003). The bonds are due on May 16, 2006, and bondholders have a put option exercisable on May 18, 2004, at 100% of
nominal value plus accrued interest. Interest is to be paid semi-annually. The annual interest rate for the first two interest payments is 8.8%. VimpelCom Finance will determine the interest rate for further interest payments no later than May 7,
2004, ten days before the second interest payment.



F-25



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



VimpelCom-Region irrevocably, fully and unconditionally guaranteed VimpelCom Finances
obligations under rouble denominated bonds.



|16. | EQUIPMENT FINANCING OBLIGATIONS
|--- | -------------------------------



Agreements between KBI and Alcatel



KBI entered into an agreement with Alcatel for the purchase and installation in four phases of mobile telecommunications GSM network equipment with a
total contract value of US$135,000. In order to finance the transaction, KBI and Alcatel entered into a deferred payment agreement in the aggregate principal amount of US$113,242 plus interest (the Alcatel Agreement).



The Alcatel Agreement requires interest to be paid at the US dollar LIBOR
rate plus 4.0% over a period to be determined by the timing of the initiation of the four different phases of the Alcatel Agreement. Financing of the contract by Alcatel provides for repayment of Phase 1 and Phase 2 to commence no later than four
years from the date of the contract. For the second phase, initiated in 1997, one annex was signed for equipment valued at US$47,785.



Repayment of amounts due under the Alcatel Agreement for the first and second phases were to begin after a grace period of three years from the date of
acceptance of the related equipment and services, however, this grace period was to expire no later than May 26, 2000. Principal and interest repayments were made in eight semi-annual installments beginning May 27, 2000. As of December 31, 2003, all
the equipment under the second phase was delivered and the principal and accrued interest were repaid on due dates.



On May 19, 2000, KBI and Alcatel signed the fifth amendment to the deferred payment agreement (the Fifth Amendment). The Fifth Amendment
provides for the deferral of payment of the amount of EURO 15,936 thousand (US$13,857) in respect of future deliveries of equipment under the fourth phase of the agreement on the purchase and installation of mobile telecommunications network
equipment. The liability accrues interest at the EURO six-month EURIBOR rate plus 9%. Principal repayments were to be made in two equal installments, no later than July 5, 2001 and December 15, 2001. Interest was to be repaid on the same dates in
the full amount accrued as of the respective date. The Fifth Amendment changed the initial terms of payment under the fourth phase. Under the initial terms, payments in respect of future deliveries of equipment were to be made within 30 days after
the delivery of equipment. As of December 31, 2002, all the equipment under the fourth phase was delivered and the principal and accrued interest were repaid on due dates.



On May 19, 2000, KBI and Alcatel signed an agreement on the purchase and installation in two phases (fifth and sixth phases)
of mobile telecommunications GSM network equipment in the total value of EURO 26,135 thousand (US$32,668 at exchange rate as of December 31, 2003). Under the new agreement, further phases may be agreed. On May 19, 2000, an annex for the fifth phase
was signed for the amount of EURO 7,135 thousand (US$8,919 at exchange rate as of December 31, 2003). On June 30, 2000, an annex for the sixth phase was signed for the amount of EURO 19,000 thousand (US$23,750 at exchange rate as of December 31,
2003).



On August 23, 2000, KBI and Alcatel signed the deferred
payment agreement for the fifth phase. This agreement provides for the deferral of payment of the amount of EURO 5,566 thousand (US$6,958 at exchange rate as of December 31, 2003) in respect of future deliveries of equipment under the fifth phase.
The liability accrues interest at the EURO six-month EURIBOR rate plus 3.5%. Principal repayments are to be made in six equal and consecutive semi-annual installments. The first installment was to become due six months after the acceptance of the
related equipment, but no later than December 1, 2001. Interest should be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2003, all the equipment was delivered under the fifth phase.



F-26



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On September 7, 2000, KBI and Alcatel signed the deferred payment agreement for the sixth phase that
provides for the deferral of payment of the amount of EURO 16,150 (US$20,188 at exchange rate as of December 31, 2003) in respect of future deliveries of equipment under the sixth phase. This agreement was amended on January 10, 2001. The amount of
deferred payments is divided in sub-phases 1, 2 and 3 in the amounts of EURO 12,828 thousand (US$16,035 at exchange rate as of December 31, 2003), EURO 1,700 thousand (US$2,125 at exchange rate as of December 31, 2003) and EURO 1,622 thousand
(US$2,028 at exchange rate as of December 31, 2003), respectively. The liability for sub-phases 1, 2 and 3 accrues interest at the EURO six-month EURIBOR rate plus 3.5%. The first installments under sub-phases 1, 2 and 3 were to become due no later
than October 1, 2001, November 24, 2001 and January 30, 2002, respectively. Principal repayments for each sub-phase are to be made in six equal and consecutive semi-annual installments. Interest in respect of the liability for each sub-phase should
be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the equipment was delivered under the sixth phase.



On December 20, 2000, KBI and Alcatel signed an annex for the seventh phase of the purchase and installation of mobile
telecommunications GSM network equipment for the amount of EURO 8,000 thousand (US$7,277). On December 26, 2000, KBI and Alcatel signed the deferred payment agreement for the seventh phase. This agreement provides for the deferral of payment of the
amount of EURO 6,800 thousand in respect of future deliveries of equipment under the seventh phase. The liability accrues interest at the EURO six-month EURIBOR rate plus 3.5%. Principal repayments are to be made in six equal and consecutive
semi-annual installments. The first installment was to become due six months after the acceptance of the related equipment, but no later than February 15, 2002. Interest should be repaid on the same dates in the full amount accrued as of the
respective date. On August 17, 2002, KBI and Alcatel agreed to accelerate the repayment. As of December 31, 2002, all the equipment was delivered under the seventh phase and all the principal and accrued interest were repaid.



On February 16, 2001, KBI and Alcatel signed an annex for the eighth phase of
the purchase and installation of mobile telecommunications GSM network equipment for the amount of EURO 8,769 thousand (US$10,961 at exchange rate as of December 31, 2003). On February 16, 2001, KBI and Alcatel signed the deferred payment agreement
in respect of future deliveries of equipment under the eighth phase. The eighth phase is divided in three sub-phases with the following amounts of deferred payments: sub-phase 1 in the amount of EURO 553 thousand (US$691 at exchange rate as of
December 31, 2003), sub-phase 2 in the amount of EURO 1,147 thousand (US$1,434 at exchange rate as of December 31, 2003) and sub-phase 3 in the amount of EURO 5,754 thousand (US$7,193 at exchange rate as of December 31, 2003). The liability for all
the three sub-phases will accrue interest at the EURO six-month EURIBOR rate plus 3.5%. Principal repayments for each sub-phase are to be made in six equal and consecutive semi-annual installments. The first installment for each sub-phase was to
become due six months after the acceptance of the related equipment, but no later than February 15, April 15 and April 30, 2002 for sub-phases 1, 2 and 3, respectively. Interest in respect of the liability for each sub-phase should be repaid on the
same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the equipment was delivered under the eighth phase.



On May 9, 2001, KBI and Alcatel signed an annex for the ninth phase of the purchase and installation of mobile telecommunications GSM network equipment
for the amount of EURO 8,500 thousand (US$10,625 at exchange rate as of December 31, 2003). On May 9, 2001, KBI and Alcatel signed the deferred payment agreement in respect of future deliveries of equipment under the ninth phase. The ninth phase is
divided in two sub-phases with the following amounts of deferred payments: sub-phase 1 in the amount of EURO 5,525 thousand (US$6,907 at exchange rate as of December 31, 2003) and sub-phase 2 in the amount of EURO 1,700 thousand (US$2,125 at
exchange rate as of December 31, 2003). The liability for sub-phases 1 and 2 accrues interest at the EURO six-month EURIBOR rate plus 3.5%. Principal repayments for each sub-phase are to be made in six equal and consecutive semi-annual installments.
The first installment for each sub-phase was to



F-27



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



become due six months after the acceptance of the related equipment, but no later than June 14 and June 15, 2002 for sub-phases 1 and 2, respectively.
Interest in respect of the liability for each sub-phase should be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the equipment was delivered under the ninth phase.



On June 22, 2001, KBI and Alcatel signed an annex for the tenth phase of the
purchase and installation of mobile telecommunications GSM network equipment for the amount of EURO 8,570 thousand (US$10,713 at exchange rate as of December 31, 2003). On June 22, 2001, KBI and Alcatel signed the deferred payment agreement in
respect of future deliveries of equipment under the tenth phase. This agreement provides for the deferral of payment of the amount of EURO 7,284 thousand (US$9,105 at exchange rate as of December 31, 2003) in respect of future deliveries of
equipment under the tenth phase. This agreement was amended on October 29, 2001. The amount of deferred payments is divided in sub-phases 1 and 2 in the amounts of EURO 6,946 thousand (US$8,683 at exchange rate as of December 31, 2003) and EURO 339
thousand (US$424 at exchange rate as of December 31, 2003), respectively. The liability for sub-phases 1 and 2 accrues interest at the EURO six-month EURIBOR rate plus 3.5%. Principal repayments are to be made in six equal and consecutive
semi-annual installments. The first installments under sub-phases 1 and 2 were to become due six months after the acceptance of the related equipment, but no later than June 15 and July 1, 2002, respectively. Interest in respect of the liability for
each sub-phase should be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the equipment was delivered under the tenth phase.



On July 20, 2001, KBI and Alcatel signed an annex for the eleventh phase of the purchase and installation of mobile
telecommunications GSM network equipment for the amount of EURO 8,500 thousand (US$7,698). On July 20, 2001, KBI and Alcatel signed the deferred payment agreement in respect of future deliveries of equipment under the eleventh phase. This agreement
provides for the deferral of payment of the amount of EURO 7,225 thousand in respect of future deliveries of equipment under the eleventh phase. The liability accrues interest at the EURO six-month EURIBOR rate plus 3.5%. Principal repayments are to
be made in six equal and consecutive semi-annual installments. The first installment was to become due six months after the acceptance of the related equipment, but no later than July 15, 2002. Interest should be repaid on the same dates in the full
amount accrued as of the respective date. On August 17, 2002, KBI and Alcatel agreed to accelerate the repayment. As of December 31, 2002, all the equipment was delivered under the eleventh phase and all the principal and accrued interest were
repaid.



On November 5, 2001, KBI and Alcatel signed an annex
for the thirteenth phase of the purchase and installation of mobile telecommunications GSM network equipment for the amount of EURO 9,300 thousand (US$11,625 at exchange rate as of December 31, 2003). On November 5, 2001, KBI and Alcatel signed the
deferred payment agreement in respect of future deliveries of equipment under the thirteenth phase. This agreement provides for the deferral of payment of the amount of EURO 7,905 thousand (US$9,881 at exchange rate as of December 31, 2003) in
respect of future deliveries of equipment under the thirteenth phase. The liability accrues interest at the EURO six-month EURIBOR rate plus 3.5%. Principal repayments are to be made in six equal and consecutive semi- annual installments. The first
installment was to become due six months after the acceptance of the related equipment, but no later than August 25, 2002. Interest should be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2002, all
the equipment was delivered under the thirteenth phase.



On
November 12, 2001, KBI and Alcatel signed an annex for the fourteenth phase of the purchase and installation of mobile telecommunications GSM network equipment for the amount of EURO 9,300 thousand (US$11,625 at exchange rate as of December 31,
2003). On November 12, 2001, KBI and Alcatel signed the deferred payment agreement in respect of future deliveries of equipment under the fourteenth phase. This agreement provides for the deferral of payment of the amount of EURO 7,905 thousand
(US$9,881 at exchange rate as of December 31, 2003) in respect of future deliveries of equipment under the fourteenth phase. The



F-28



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



liability accrues interest at the EURO six-month EURIBOR rate plus 3.5%. Principal repayments are to be made in six equal and consecutive semi-annual
installments. The first installment was to become due six months after the acceptance of the related equipment, but no later than August 30, 2002. Interest should be repaid on the same dates in the full amount accrued as of the respective date. As
of December 31, 2002, all the equipment was delivered under the fourteenth phase.



On January 8, 2002, KBI and Alcatel signed an annex for the fifteenth phase of the purchase and installation of mobile telecommunications GSM network equipment for the amount of EURO 14,190 thousand (US$17,738 at
exchange rate as of December 31, 2003). On January 8, 2002, KBI and Alcatel signed the deferred payment agreement in respect of future deliveries of equipment under the fifteenth phase. This agreement provides for the deferral of payment of the
amount of EURO 12,061 thousand (US$15,076 at exchange rate as of December 31, 2003) in respect of future deliveries of equipment under the fifteenth phase. The liability accrues interest at the EURO six-month EURIBOR rate plus 2.9%. Principal
repayments are to be made in six equal and consecutive semi-annual installments. The first installment was to become due six months after the acceptance of the related equipment, but no later than October 31, 2002. Interest should be repaid on the
same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the equipment was delivered under the fifteenth phase.



On January 8, 2002, KBI and Alcatel signed an annex for the sixteenth phase of the purchase and installation of mobile telecommunications GSM network
equipment for the amount of EURO 15,040 thousand (US$18,800 at exchange rate as of December 31, 2003). On January 8, 2002, KBI and Alcatel signed the deferred payment agreement in respect of future deliveries of equipment under the sixteenth phase.
This agreement provides for the deferral of payment of the amount of EURO 12,784 thousand (US$15,980 at exchange rate as of December 31, 2003) in respect of future deliveries of equipment under the sixteenth phase. The liability accrues interest at
the EURO six-month EURIBOR rate plus 2.9 %. Principal repayments are to be made in six equal and consecutive semi-annual installments. The first installment becomes due six months after the acceptance of the related equipment, but no later than
January 10, 2003. Interest should be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the equipment was delivered under the sixteenth phase.



On March 27, 2002, KBI and Alcatel signed an annex for the seventeenth phase
of the purchase and installation of mobile telecommunications GSM network equipment for the amount of EURO 14,376 thousand (US$17,970 at exchange rate as of December 31, 2003). On March 27, 2002, KBI and Alcatel signed the deferred payment agreement
in respect of future deliveries of equipment under the seventeenth phase. This agreement provides for the deferral of payment of the amount of EURO 12,220 thousand (US$15,275 at exchange rate as of December 31, 2003) in respect of future deliveries
of equipment under the seventeenth phase. The liability accrues interest at the EURO six-month EURIBOR rate plus 2.9 %. Principal repayments are to be made in six equal and consecutive semi-annual installments. The first installment becomes due six
months after the acceptance of the related equipment, but no later than June 10, 2003. Interest should be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the equipment was delivered under
the seventeenth phase.



On April 17, 2002, KBI and Alcatel
signed an annex for the eighteenth phase of the purchase and installation of mobile telecommunications GSM network equipment for the amount of EURO 11,646 thousand (US$14,558 at exchange rate as of December 31, 2003). On April 17, 2002, KBI and
Alcatel signed the deferred payment agreement in respect of future deliveries of equipment under the eighteenth phase. The eighteenth phase is divided in three sub-phases with the following amounts of deferred payments: sub-phase 1 in the amount of
EURO 5,693 thousand (US$7,116 at exchange rate as of December 31, 2003), sub-phase 2 in the amount of EURO 2,208 thousand (US$2,760 at exchange rate as of December 31, 2003) and sub-phase 3 in the amount of



F-29



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



EURO 1,998 thousand (US$2,498 at exchange rate as of December 31, 2003). The liability for sub-phases 1, 2 and 3 accrues interest at the EURO six-month
EURIBOR rate plus 2.9%. The first installment for each sub-phase becomes due no later than June 15, 2003, May 1, 2003 and August 1, 2003, respectively. Principal repayments for each subphase are to be made in six equal and consecutive semi-annual
installments. Interest in respect of the liability for each sub-phase should be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the equipment was delivered under the eighteenth phase.



On July 11, 2002, KBI and Alcatel signed an annex for the
nineteenth phase of the purchase and installation of mobile telecommunications GSM network equipment for the amount of EURO 12,000 thousand (US$15,000 at exchange rate as of December 31, 2003). On July 11, 2002, KBI and Alcatel signed the deferred
payment agreement in respect of future deliveries of equipment under the nineteenth phase. This agreement provides for the deferral of payment of the amount of EURO 10,200 thousand (US$12,750 at exchange rate as of December 31, 2003) in respect of
future deliveries of equipment under the nineteenth phase. The liability will accrue interest at the EURO six-month EURIBOR rate plus 2.9 %. Principal repayments are to be made in six equal and consecutive semi-annual installments. The first
installment becomes due six months after the acceptance of the related equipment, but no later than August 28, 2003. Interest should be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the
equipment was delivered under the nineteenth phase.



On August
27, 2002, KBI and Alcatel signed an annex for the twentieth phase of the purchase and installation of mobile telecommunications GSM network equipment for the amount of EURO 12,000 thousand (US$15,000 at exchange rate as of December 31, 2003). On
August 27, 2002, KBI and Alcatel signed the deferred payment agreement in respect of future deliveries of equipment under the twentieth phase. This agreement provides for the deferral of payment of the amount of EURO 10,200 thousand (US$12,750 at
exchange rate as of December 31, 2003) in respect of future deliveries of equipment under the twentieth phase. The liability accrues interest at the EURO six-month EURIBOR rate plus 2.9 %. Principal repayments are to be made in six equal and
consecutive semi-annual installments. The first installment becomes due six months after the acceptance of the related equipment, but no later than November 27, 2003. Interest should be repaid on the same dates in the full amount accrued as of the
respective date. As of December 31, 2002, all the equipment was delivered under the twentieth phase.



No deferral of payment under the twelfth, twenty first, twenty second, twenty third, twenty fourth, twenty fifth, twenty sixth, twenty seventh and twenty
eighth phases was agreed between KBI and Alcatel.



In 2003,
2002, and 2001, interest of US$6,224, US$7,268 and US$8,013, respectively, was accrued under all agreements between KBI and Alcatel.



VimpelCom made all payments to Alcatel in respect of principal and accrued interest amounts in accordance with the above-mentioned agreements.



As of December 31, 2003, telecommunications equipment received from
Alcatel with the carrying amount of US$52,160 was pledged as collateral to secure the liability to Alcatel.



VimpelCom irrevocably, fully and unconditionally guaranteed KBIs obligations under equipment financing agreements with Alcatel for the total amount
of EURO 65,358 (US$81,697 at exchange rate as of December 31, 2003).



Agreements between VimpelCom-Region and Alcatel



On August 31, 2001, VimpelCom-Region and Alcatel signed a frame contract for the supply of switching, radio and other telecommunications equipment (the Frame Contract) and Indent 1 to the Frame Contract (Indent 1) for the amount
of EURO 9,344 thousand (US$11,680 at exchange rate as of December 31, 2003).



F-30



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On September 21, 2001, VimpelCom-Region and Alcatel signed an agreement for the deferral of payment
of the amount of EURO 9,344 thousand (US$11,680 at exchange rate as of December 31, 2003) in respect of future deliveries of equipment under Indent 1. The liability accrued interest at the EURO three-month EURIBOR rate plus 2%. The initial payment
date under Indent 1 was February 28, 2002, extended until August 31, 2002. The first interest payment was to be made 30 days after the delivery of the last consignment of the equipment, but no later than December 31, 2001. In addition, interest
payments were to be made on February 28, May 31, and August 31, 2002. Interest was to be repaid in the full amount accrued as of the respective date.



On December 20, 2002, VimpelCom-Region and Alcatel agreed to change the terms under Indent 1. Interest rate was changed to the EURO six-month EURIBOR rate
plus 2.9%. Principal repayments are to be made in six equal and consecutive semi-annual installments. The first installment was made on June 27, 2003. Interest should be repaid on the same dates in the full amount accrued as of the respective date.
As of December 31, 2002, all the equipment was delivered under Indent 1.



On September 21, 2001, VimpelCom-Region and Alcatel signed Indent 2 to the Frame Contract (Indent 2) for the amount of EURO 9,000 thousand (US$11,250 at exchange rate as of December 31, 2003). On September
21, 2001, VimpelCom-Region and Alcatel signed an agreement for the deferral of payment of the amount of EURO 9,000 thousand (US$11,250 at exchange rate as of December 31, 2003) in respect of future deliveries of equipment under Indent 2. The
liability accrued interest at the EURO three-month EURIBOR rate plus 2%. Initial principal repayment date was March 21, 2002, extended until September 21, 2002. The first interest payment was to be made 30 days after the delivery of the last
consignment of the equipment, but no later than January 21, 2002. In addition, interest payments were to be made on March 21, June 21, and September 21, 2002. Interest was to be repaid in the full amount accrued as of the respective date.



On December 20, 2002, VimpelCom-Region and Alcatel agreed to
change the terms under Indent 2. Interest rate was changed to the EURO six-month EURIBOR rate plus 2.9%. Principal repayments are to be made in six equal and consecutive semi-annual installments. The first installment was made on June 27, 2003.
Interest should be repaid on the same dates in the full amount accrued as of the respective date. As of December 31, 2002, all the equipment was delivered under Indent 2.



On September 16, 2002, VimpelCom-Region and Alcatel signed Indent 3 to the Frame Contract (Indent 3) for the
amount of EURO 9,500 thousand (US$11,875 at exchange rate as of December 31, 2003). On September 16, 2002, VimpelCom-Region and Alcatel signed an agreement for the deferral of payment of the amount of EURO 8,075 thousand (US$10,094 at exchange rate
as of December 31, 2003) in respect of future deliveries of equipment under Indent 3. The liability accrues interest at the EURO three-month EURIBOR rate plus 5%. Principal repayment was to be made when VimpelCom-Region enters in certain financing
arrangements, but no later than June 25, 2003. The first interest payment was made on March 25, 2003. The second interest payment shall be made together with the principal repayment. Interest should be repaid in the full amount accrued as of
respective date. As of December 31, 2002, all the equipment was delivered under Indent 3. As of December 31, 2003, all the principal and accrued interest were paid.



No deferral of payment under Indent 4 was agreed between VimpelCom-Region and Alcatel.



On October 31, 2002, VimpelCom-Region and Alcatel signed Indent 5 to the
Frame Contract (Indent 5) for the amount of US$6,423. On October 31, 2002, VimpelCom-Region and Alcatel signed an agreement for the deferral of payment of the amount of US$5,460 in respect of future deliveries of equipment under Indent
5. The liability accrues interest at the US dollar three-month LIBOR rate plus 5%. Principal repayment was to be made when VimpelCom-Region enters in certain financing arrangements, but no later than June 25, 2003. The first interest payment was
made on March 25, 2003. The second interest payment shall be made together with the



F-31



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



principal repayment. Interest should be repaid in the full amount accrued as of respective date. As of December 31, 2003, all the equipment was delivered
under Indent 5 and all the principal and accrued interest were paid.



In 2003, 2002 and 2001, interest of US$1,182, US$952 and US$9, respectively, was accrued under all agreements between VimpelCom-Region and Alcatel.



VimpelCom-Region made all payments to Alcatel in respect of principal and accrued interest amounts in accordance with the above-mentioned agreements.



As of December 31, 2003, telecommunications equipment received
from Alcatel with the carrying amount of US$12,997 was pledged as collateral to secure the liability to Alcatel.



VimpelCom irrevocably, fully and unconditionally guaranteed VimpelCom-Regions obligations under equipment financing agreements with Alcatel for the
total amount of EURO 9,254 thousand (US$11,568 at exchange rate as of December 31, 2003).



Agreements between VimpelCom-Region and Ericsson



On September 28, 2001, VimpelCom-Region and Ericsson Radio Systems AB (Ericsson) signed a contract for delivery of GSM equipment (the Supply Contract) and a purchase order under the Supply
Contract for US$16,600. Under the contract, overdue amounts accrue interest at the US dollar LIBOR rate plus 3.5%. All the equipment under the Supply Contract was delivered before December 31, 2002.



On December 3, 2001, VimpelCom-Region and Ericsson Credit AB signed a credit
agreement on the financing of the delivery of equipment under the Supply Contract in the amount of US$16,600 (the Credit Agreement). VimpelCom-Region obtained financing under the Credit Agreement in January and February 2002, and used
the proceeds to repay its obligation to Ericsson under the Supply Contract. The liability under the Credit Agreement accrued interest at the US dollar LIBOR rate plus 2% and was repaid before December 31, 2002.



On January 9, February 5, July 15 and September 19, 2002, VimpelCom-Region
and Ericsson Radio Systems AB (Ericsson) signed four purchase orders under the Supply Contract for US$2,979, US$27,316, US$519 and US$7,698.



On August 21, 2002, VimpelCom-Region and Ericsson Credit AB signed second tranche under the Credit Agreement on the financing of the delivery of equipment
under the Supply Contract in the amount of US$70,000. The amount of the financing was subsequently reduced to US$45,642. VimpelCom-Region obtained financing under the Credit Agreement in 2002, and used the proceeds to repay its obligation to
Ericsson under the Supply Contract. Initially the liability under the Credit Agreement accrued interest at the US dollar LIBOR rate plus 2% and was payable on December 20, 2002. On December 20, 2002, Ericsson extended the payment date until June 20,
2003 and interest rate was changed to US dollar LIBOR rate plus 5%. The liability under the second tranche of the Credit Agreement was fully repaid before December 31, 2003.



On December 20, 2002, VimpelCom-Region and Ericsson signed a purchase order under the Supply Contract for US$10,500.



On January 10 and April 14, 2003, VimpelCom-Region and
Ericsson signed two purchase orders under the Supply Contract, for US$11,493 and US$25,590, respectively.



On February 25, 2003, VimpelCom-Region and Ericsson Credit AB signed the third tranche under the Credit Agreement on the financing of the delivery of
equipment under the Supply Contract, in the amount of



F-32



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



US$55,900. VimpelCom-Region obtained financing under the Credit Agreement in the second and third quarters 2003, and used the proceeds to repay its
obligation to Ericsson under the Supply Contract. The liability under the Credit Agreement accrued interest at the US dollar LIBOR rate plus 5%. On June 20, 2003, Ericsson Credit AB extended the payment of US$44,730 under the third tranche until
November 20, 2003. The liability under the third tranche of the Credit Agreement was fully repaid before December 31, 2003.



In 2003, 2002 and 2001, interest of US$2,687, US$1,596 and US$67, respectively, was accrued under all agreements between VimpelCom-Region and Ericsson.



Agreements between StavTeleSot and Alcatel



As of December 31, 2003, StavTeleSot had obligations under equipment
financing agreements with Alcatel of EURO2,142 thousand (US$2,678 at exchange rate as of December 31, 2003). Equipment was received by StavTeleSot before it was acquired by VimpelCom-Region (Note 5).



Agreements between VimpelCom-Region and Technoserve



On May 16, 2002, VimpelCom-Region and Technoserve signed an agreement
(the Agreement) for delivery of GSM equipment for EURO 22,000 thousand (US$27,500 at exchange rate as of December 31, 2003). This agreement provides for the deferral of payment of the amount of EURO 18,700 thousand (US$23,375 at exchange
rate as of December 31, 2003) in respect of the future deliveries of equipment. The liability will accrue interest at a rate of 10% per annum. The accrual of interest will start 91 day after the advance payment or after the last consignment of the
equipment, whatever is later. Principal repayments are to be made in twelve equal and consecutive quarterly installments. The first installment becomes due three months after the delivery of the last consignment of the equipment.



On May 30, 2003, VimpelCom-Region and Technoserve signed the first amendment
to the Agreement. The first amendment increased the total value of the Agreement by EURO 4,400 thousand (US$5,500 at exchange rate as of December 31, 2003) to EURO 26,400 thousands (US$33,000 at exchange rate as of December 31, 2003). Initially, the
liability under the Agreement accrued interest at a rate of 10% per annum. The liability under deliveries occurred after May 30, 2003, accrues interest at a rate of 8% per annum.



On October 20, 2003, VimpelCom-Region and Technoserve signed the second amendment to the Agreement. The second amendment
increased the total value of the Agreement by EURO 2,500 thousand (US$3,125 at exchange rate as of December 31, 2003) to EURO 28,900 thousands (US$36,125 at exchange rate as of December 31, 2003). The second amendment provides additional deferral of
payment in the amount of EURO 2,125 thousand (US$2,656 at exchange rate as of December 31, 2003).



As of December 31, 2003, the equipment in the amount of EURO 26,977 thousand was delivered under the Agreement.



Agreements between VimpelCom and Technoserve



On April 25, 2002, VimpelCom and Technoserve signed an agreement for
delivery of GSM equipment for EURO 6,000 thousand (US$7,500 at exchange rate as of December 31, 2003). This agreement provides for the deferral of payment of the amount of EURO 5,100 thousand (US$6,375 at exchange rate as of December 31, 2003) in
respect of the future deliveries of equipment. The liability will accrue interest at a rate of 10% per annum. The accrual of interest will start 91 day after the advance payment or after the last consignment of the equipment, whatever is later.
Principal repayments are to be made in twelve equal and consecutive quarterly installments. The first installment becomes due three months after the delivery of the last consignment of the equipment.



F-33



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of December 31, 2003, total value of equipment delivered under this contract was EURO 4,895
(US$6,119 at exchange rate as of December 31, 2003).



Agreements between
VimpelCom and General DataCom



On August 28, 2002,
VimpelCom and Limited Liability Company General DataCom (DataCom) signed an agreement for delivery of telecommunications equipment for US$15,000. This agreement provides for the deferral of payment of the amount of US$12,750 in respect
of the future deliveries of equipment. The liability will accrue interest at the US dollar six-month LIBOR rate plus 2%. The accrual of interest will start after the delivery of the last consignment of the equipment. Principal repayments are to be
made in twelve equal and consecutive quarterly installments. The first installment becomes due three months after the delivery of the last consignment of the equipment.



On January 4, 2003, VimpelCom and DataCom signed an amendment to this agreement (the Amendment). Under the
Amendment the total value of equipment to be delivered is US$7,876. As of December 31, 2003, total value of equipment delivered under this contract was US$7,876.



Amounts outstanding in connection with VimpelComs equipment financing obligation consisted of the following at
December 31:



|                                                   |  |      |         |   |      |     |          |  
|-------------------------------------------------- |  | ---- | ------- | - | ---- | --- | -------- | -
|                                                   |  | 2003 |         |   | 2002 |    
|Alcatel (agreements with KBI):                     |  |      |         |   |      |     |          |  
|Supplier credit facilities                         |  | US$  | 81,697  |   |      | US$ | 119,315  |  
|Accrued interest                                   |  |      | 1,003   |   |      |     | 2,343    |  
|Alcatel (agreements with VimpelCom-Region):        |  |      |         |   |      |     |          |  
|Supplier credit facilities                         |  |      | 11,567  |   |      |     | 23,877   |  
|Accrued interest                                   |  |      |        |   |      |     | 58       |  
|Alcatel (agreements with StavTeleSot):             |  |      |         |   |      |     |          |  
|Supplier credit facilities                         |  |      | 2,678   |   |      |     |         |  
|Accrued interest                                   |  |      |        |   |      |     |         |  
|Ericsson (agreements with VimpelCom-Region):       |  |      |         |   |      |     |          |  
|Supplier credit facilities                         |  |      |        |   |      |     | 45,486   |  
|Accrued interest                                   |  |      |        |   |      |     | 74       |  
|Technoserve A/S (agreements with VimpelCom-Region) |  |      |         |   |      |     |          |  
|Supplier credit facilities                         |  |      | 18,889  |   |      |     | 10,981   |  
|Accrued interest                                   |  |      | 41      |   |      |     | 12       |  
|Technoserve A/S (agreements with VimpelCom)        |  |      |         |   |      |     |          |  
|Supplier credit facilities                         |  |      | 2,654   |   |      |     | 4,002    |  
|Accrued interest                                   |  |      | 18      |   |      |     | 4        |  
|DataCom (agreements with VimpelCom)                |  |      |         |   |      |     |          |  
|Supplier credit facilities                         |  |      | 4,444   |   |      |     | 6,257    |  
|Accrued interest                                   |  |      | 62      |   |      |     |         |  
|Other                                              |  |      | 890     |   |      |     | 3,633    |  
|                                                   |  |      |         |   |      |     |          |  
|                                                   |  |      | 123,943 |   |      |     | 216,042  |  
|Less current portion                               |  |      | (70,935 | ) |      |     | (134,617 | )
|                                                   |  |      |         |   |      |     |          |  
|Total long-term equipment financing                |  | US$  | 53,008  |   |      | US$ | 81,425   |  
|                                                   |  |      |         |   |      |     |          |  



F-34



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Future payments under bank loans, rouble denominated bonds and supplier credit facilities are as
follows:



|     |  |     |        
|---- |  | --- | -------
|2004 |  | US$ | 208,095
|2005 |  |     | 323,766
|2006 |  |     | 36,257 
|2007 |  |     | 23,100 
|2008 |  |     |       
|     |  |     |        
|     |  | US$ | 591,218
|     |  |     |        



|17. | CAPITAL LEASE OBLIGATIONS
|--- | -------------------------



As of December 31, 2003, Bee-Line Samara had obligations under lease agreements with Sberbankinveststroy of US$853. Equipment under the lease agreements
was received by Bee-Line Samara before it was acquired by VimpelCom (Note 5). Under the lease agreements, the ownership of the leased assets is to be transferred to Bee-Line Samara after the end of the lease term and execution of all lease payments.
Equipment received under these agreements was accounted for as capital leases.



As of December 31, 2003, VimpelCom had obligations under lease agreements with OJSC Investelectrosvyaz of US$14,888. Equipment under the lease agreements was received by VimpelCom on July 1, 2003 (Note
10). Under the lease agreements, the lease term is equal to the estimated remaining economic life of the leased property. Equipment received under these agreements was accounted for as capital leases.



Future payments under capital lease obligations are as follows:



|     |  |     |       
|---- |  | --- | ------
|2004 |  | US$ | 6,621 
|2005 |  |     | 3,816 
|2006 |  |     | 4,216 
|2007 |  |     | 1,121 
|2008 |  |     |      
|     |  |     |       
|     |  | US$ | 15,774
|     |  |     |       



|18. | SHAREHOLDERS EQUITY
|--- | --------------------



In 1996, VimpelCom issued 6,426,600 shares of preferred stock. As of December 31, 2003, all of the shares of preferred stock were owned by Eco Telecom.
Each share of preferred stock entitles its holder to one vote, to receive a fixed dividend of .001 ruble per share per year, and to receive a fixed liquidation value of .005 rubles per share in the event of VimpelComs liquidation, to the
extent there are sufficient funds available. As of December 31, 2003, this liquidation preference amounted to approximately US$2.8 at the official year-end exchange rate. Each share of preferred stock is convertible into one share of common stock at
any time after June 30, 2016 at the election of the holder upon payment to VimpelCom of a conversion premium equal to 100% of the market value of one share of common stock at the time of conversion.



Under the agreement dated December 1, 1998, prior to the occurrence of
certain transactions, VimpelCom had the right to purchase from Telenor a part of the shares previously issued to Telenor. The number of shares that could be purchased was limited by a condition that Telenors share in VimpelComs total
outstanding voting capital stock should not become less than 25% plus one share after the call option is exercised. In December 2000, VimpelCom purchased 250,000 shares of common stock for US$4,993 from Telenor under its call option to provide for
shares to support grants under VimpelComs stock option plan (Note 26). These shares were held



F-35



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



by VC ESOP N.V., a consolidated subsidiary of VimpelCom, (132,882 shares and 202,351 shares as of December 31, 2003 and 2002) and were treated as treasury
shares in the accompanying consolidated financial statements.



As of December 31, 2003 and 2002, 27,752 shares (37,003 ADSs) and 2,080,926 shares (2,774,568 ADSs), respectively, of VimpelComs common stock issued on July 28, 2000 were held by VC Limited, a consolidated affiliate of VimpelCom.
These shares were treated as treasury shares in the accompanying consolidated financial statements.



On October 8, 2001, VimpelCom purchased 3,744 shares of its common stock for US$75. On November 5, 2001, all of these shares were sold to Telenor for
US$75.



On November 5, 2001, VimpelCom issued 5,150,000 shares
of common stock (6,866,667 ADS) to Eco Telecom, raising US$92,197 (net of cost of issuance of US$10,803).



In 2002, VimpelCom sold 47,649 shares of its common stock for US$1,917. The excess of the proceeds over the cost of treasury shares sold in the amount of
US$965 was allocated to additional paid-in capital in the accompanying consolidated financial statements.



In the third and fourth quarters 2003, VimpelCom used 2,053,174 shares (2,737,565 ADSs) of its treasury stock to meet its conversion obligations for
senior convertible notes (Note 14). The excess of the nominal value of senior convertible notes reduced by unamortised debt issue cost over the cost of the treasury shares sold in the amount of US$32,617 was allocated to additional paid-in capital
in the accompanying consolidated financial statements as of December 31, 2003.



On October 24, 2003, an Extraordinary General Meeting of VimpelCom Shareholders approved the merger of VimpelCom and VimpelCom-Region and the related issuance of 10,948,821 new VimpelCom common shares (the equivalent
of 14,598,428 ADSs) in exchange for the 44.7% stake in VimpelCom-Region that is currently owned by Eco Telecom and by Telenor. Following the merger, Telenor will own approximately 26.6% and 29.9%, respectively, and Alfa Group will own approximately
32.9% and 24.5%, respectively, of the Companys total voting stock and total common stock. As of March 15, 2004, the merger and issuance of new shares had not occurred.



Each outstanding share of VimpelComs common stock entitles its holder to participate in shareholders meetings, to
receive dividends in such amounts as have been validly determined by the board of directors or the shareholders, and in the event of VimpelComs liquidation, to receive part of VimpelComs assets to the extent there are sufficient funds
available.



In accordance with Russian legislation, VimpelCom
can distribute all profits as dividends or transfer them to reserves. Dividends may only be declared from accumulated undistributed and unreserved earnings as shown in the Russian statutory financial statements, not out of amounts previously
transferred to reserves. Dividends to shareholders  residents of Russia are subject to a 6% withholding tax. Dividends to other shareholders are subject to a 15% withholding tax, which may be reduced or eliminated by double tax treaties.
Transfers to reserves have been insignificant through December 31, 2003. As of December 31, 2003, VimpelComs retained earnings distributable under Russian legislation were US$163,090 at the official year-end exchange rate.



As of December 31, 2003, the amount of consolidated retained earnings of
VimpelCom represented by undistributed earnings of companies which are accounted for using the equity method was US$2,319.



F-36



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|19. | VC LIMITED
|--- | ----------



VC Limited is a special purpose entity formed under the laws of the British Virgin Islands for the purpose of holding the ADSs that were used to satisfy
the conversion obligations under the convertible notes. VimpelCom does not own directly or indirectly any shares of VC Limited. However, VimpelCom controls VC Limited pursuant to an agreement between VimpelCom and the sole shareholder of VC Limited
by which VimpelCom has an irrevocable proxy to vote the shares of VC Limited for all purposes.



As of December 31, 2003 and 2002, the assets of VC Limited primarily consisted of shares of VimpelComs common stock with the cost of US$768 and US$57,600, respectively. The liabilities of VC Limited primarily
consisted of a loan due to VimpelCom B.V., a subsidiary of VimpelCom Finance B.V., in the amount of US$0 and US$62,001 as of December 31, 2003 and December 31, 2002. There were no other material assets and liabilities in the financial statements of
VC Limited as of December 31, 2003 and 2002. Expenses of VC Limited for the years ended December 31, 2003, 2002 and 2001 primarily consisted of interest expense on the loan due to VimpelCom B.V. in the amount of US$3,199, US$3,159 and US$2,807,
respectively. VC Limited had no other material revenues or expenses for each of the years 2003, 2002 and 2001.



|20. | VIMPELCOM-REGION
|--- | ----------------



Under the agreements on investments in VimpelCom-Region, dated May 2001, by and among VimpelCom, VimpelCom-Region, Eco Telecom and Telenor, VimpelCom
contributed US$103,000 as equity to VimpelCom- Region (Note 1). In addition, Eco Telecom was to invest a total of US$117,000 of equity directly into VimpelCom-Region in two equal tranches, in November 2002 and November 2003. Telenor and VimpelCom
had options, either collectively or individually, to invest up to an aggregate of US$117,000 directly in VimpelCom-Region simultaneously with each of Eco Telecoms contributions.



On December 3, 2001, VimpelCom-Region sold to Eco Telecom 1,323 newly issued shares of convertible voting preferred stock of
VimpelCom-Region for a purchase price of approximately US$0.4. Each share of preferred stock entitles its holder to one vote, to receive a fixed dividend of .01 ruble per share per year, and to receive a fixed liquidation value of 20 rubles per
share in the event of VimpelCom-Regions liquidation, to the extent there are sufficient funds available. As of December 31, 2003, this liquidation preference amounted to approximately US$0.9 at the official year end exchange rate. Each share
of preferred stock is convertible into one share of common stock, but no later than April 1, 2050, upon an official registration of common stock issue. There is no premium payable on conversion. In accordance with the agreements on investments in
VimpelCom-Region, dated May 30, 2001, the shares of preferred stock should be re-distributed between Eco Telecom, VimpelCom and Telenor upon equity contributions to VimpelCom-Region in order to maintain certain percentage of the parties in the
voting capital stock of VimpelCom-Region. Upon the fulfillment of the agreements dated May 30, 2001, the shares of preferred stock shall be converted into common stock.



In addition, on December 3, 2001, VimpelCom sold to Eco Telecom one share of common stock of VimpelCom-Region for a purchase
price of US$40.



On May 15, 2002, the annual shareholders
meeting of VimpelCom approved the following changes to the agreements on investments in VimpelCom-Region, dated May 30, 2001.



VimpelCom converted its options to purchase newly issued shares of VimpelCom-Region into an obligation and accelerated this obligation to November 2003,
and Telenor accelerated its corresponding options to November 2003, in each case, subject to extension in certain instances. Eco Telecoms investments in VimpelCom-Region were scheduled as required under the original agreements dated May 30,
2001: US$58,480 in November 2002 and US$58,520 in November 2003, with each date subject to extension in certain cases, unless Eco Telecom chooses to accelerate all or a portion of its third tranche investment.



F-37



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



VimpelCom committed to provide VimpelCom-Region with a combination of secured loans, guarantees and
leases of equipment and other assets with a total value of up to US$92,000, and with unsecured credits of up to US$30,000, with terms up to six years.



To the extent that external financing is not obtained by February 2005 in an amount necessary to meet VimpelCom-Regions five-year funding plan,
VimpelCom-Region will give each of its shareholders the right to contribute to its capital the amount of cash necessary to make up the funding shortfall on a pro rata basis. If any shareholder does not exercise its right to make such capital
contribution in full, the other shareholders which fully contribute their pro rata amount will have the right to contribute all or a portion of such shareholders capital contribution on a pro rata basis. The shareholders of VimpelCom-Region
further agreed to vote in favor of, and take all actions necessary to effect the issuance of VimpelCom-Region ordinary shares in connection with such capital contribution; provided that such obligation will not be applicable if the aggregate amount
of the additional funds raised by VimpelCom-Region (excluding the capital increases in connection with the second and third closings in November 2002 and November 2003, respectively) exceeds US$300,000.



VimpelCom-Regions Board of Directors was disbanded as part of the
unified management structure of VimpelCom and VimpelCom-Region.



On November 12, 2002, VimpelCom, Eco Telecom and Telenor each purchased 1,462 newly issued shares of VimpelCom-Regions common stock for US$58,480. Simultaneously, Eco Telecom sold 231 and 860 shares of VimpelCom-Regions
preferred stock to Telenor and VimpelCom, respectively, at a price of 20 rubles per share. The closing represents the second tranche of equity investments into VimpelCom-Region in accordance with the agreement dated May 30, 2001, as amended.



Capital contributions of Eco Telecom and Telenor in
VimpelCom-Region exceeded 35.01% of net assets of VimpelCom-Region after the contributions by US$23,073. The gain on the sale of newly issued stock of a subsidiary was included in additional paid-in capital in the consolidated financial statements
of VimpelCom for the year ended December 31, 2002.



In
anticipation of the announced merger between VimpelCom and VimpelCom-Region, approved on October 24, 2003 by an Extraordinary General Meeting of VimpelCom Shareholders (Note 18), Eco Telecom has accelerated the third tranche of its investment into
VimpelCom-Region.



On August 27, 2003, Eco Telecom purchased
1,463 newly issued shares of VimpelCom-Regions common stock for US$58,520. Simultaneously, VimpelCom and Telenor sold 128 and 34 shares of VimpelCom-Regions preferred stock, respectively, to Eco Telecom, at a price of 20 rubles per
share. The closing represented the third tranch of equity investments into VimpelCom-Region in accordance with the agreement dated May 30, 2001, as amended. Following the completion of this investment tranche, VimpelComs interest in
VimpelCom-Region became 55.31%.



VimpelComs share in net
assets of VimpelCom-Region increased by US$4,945 as a result of capital contribution of Eco Telecom made on August 27, 2003. The gain on the sale of newly issued stock of a subsidiary was included in additional paid-in capital in the consolidated
financial statements of VimpelCom as of December 31, 2003.



As
of December 31, 2003, issued and outstanding common stock of VimpelCom-Region comprised 9,818 shares.



F-38



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|21. | INCOME TAXES
|--- | ------------



The Russian Federation was the only tax jurisdiction in which VimpelComs income was subject to taxation.



On August 6, 2001, a law was signed which introduced certain changes in
Russian tax legislation reducing the statutory income tax rate from 35% to 24% effective January 1, 2002. The effect of the new tax legislation was recognized in the period of enactment.



Income tax expense (benefit) consisted of the following for the years ended December 31:



|                     |  |      |         |   |      |     |        |      |  |     |        |  
|-------------------- |  | ---- | ------- | - | ---- | --- | ------ | ---- |  | --- | ------ | -
|                     |  | 2003 |         |   | 2002 |     |        | 2001 | 
|Current income taxes |  | US$  | 120,209 |   |      | US$ | 58,324 |      |  | US$ | 28,509 |  
|Deferred taxes       |  |      | (11,568 | ) |      |     | (8,385 | )    |  |     | (9,970 | )
|                     |  |      |         |   |      |     |        |      |  |     |        |  
|                     |  | US$  | 108,641 |   |      | US$ | 49,939 |      |  | US$ | 18,539 |  
|                     |  |      |         |   |      |     |        |      |  |     |        |  



A reconciliation
between the income tax expense reported in the accompanying consolidated financial statements and income before taxes multiplied by the statutory tax rates of 35% (from January 1, 2001 through December 31, 2001) and 24% (from January 1, 2002 through
December 31, 2003) for the years ended December 31 is as follows:



|                                                                                                           |  |      |         |   |      |     |        |  |     |         |  
|---------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | --- | ------ |  | --- | ------- | -
|                                                                                                           |  | 2003 |         |   | 2002 |     | 2001   | 
|Income tax expense computed on income before taxes at statutory tax rate                                   |  | US$  | 88,752  |   |      | US$ | 42,647 |  | US$ | 23,046  |  
|Effect of investment incentive deductions                                                                  |  |      |        |   |      |     |       |  |     | (16,460 | )
|Effect of non-deductible expenses and other permanent differences                                          |  |      | 27,421  |   |      |     | 6,528  |  |     | 16,460  |  
|Effect of deductible temporary differences not recognized as measured by the change in valuation allowance |  |      | (7,532  | ) |      |     | 764    |  |     | 1,289   |  
|Effect of changes in tax rate                                                                              |  |      |        |   |      |     |       |  |     | (5,796  | )
|                                                                                                           |  |      |         |   |      |     |        |  |     |         |  
|Income tax expense reported in accompanying consolidated financial statements                              |  | US$  | 108,641 |   |      | US$ | 49,939 |  | US$ | 18,539  |  
|                                                                                                           |  |      |         |   |      |     |        |  |     |         |  



F-39



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The deferred tax balances were calculated by applying the presently enacted statutory tax rate
applicable to the period in which the temporary differences between the carrying amounts and tax base of assets and liabilities are expected to reverse. The amounts reported in the accompanying consolidated financial statements at December 31
consisted of the following:



|                                           |  |      |        |   |      |     |        |  
|------------------------------------------ |  | ---- | ------ | - | ---- | --- | ------ | -
|                                           |  | 2003 |        |   | 2002 |    
|Deferred tax assets:                       |  |      |        |   |      |     |        |  
|Accrued operating and interest expenses    |  | US$  | 9,249  |   |      | US$ | 5,192  |  
|Deferred revenue                           |  |      | 16,610 |   |      |     | 9,868  |  
|Bad debts, net of revenue accrual          |  |      |       |   |      |     | 2,599  |  
|Loss carry-forwards                        |  |      | 421    |   |      |     | 5,736  |  
|                                           |  |      |        |   |      |     |        |  
|                                           |  |      | 26,280 |   |      |     | 23,395 |  
|Valuation allowance                        |  |      |       |   |      |     | (7,532 | )
|                                           |  |      |        |   |      |     |        |  
|                                           |  |      | 26,280 |   |      |     | 15,863 |  
|Deferred tax liabilities:                  |  |      |        |   |      |     |        |  
|Revenue accrual, net of bad debts          |  |      | 4,410  |   |      |     |       |  
|Non-current assets                         |  |      | 32,960 |   |      |     | 33,854 |  
|Forward agreement                          |  |      | 3,364  |   |      |     | 1,494  |  
|                                           |  |      |        |   |      |     |        |  
|                                           |  |      | 40,734 |   |      |     | 35,348 |  
|                                           |  |      |        |   |      |     |        |  
|Net deferred tax liabilities               |  |      | 14,454 |   |      |     | 19,485 |  
|Add current deferred tax assets            |  |      | 21,377 |   |      |     | 15,742 |  
|Less current deferred tax liability        |  |      | (1,451 | ) |      |     |       |  
|                                           |  |      |        |   |      |     |        |  
|Total long-term net deferred tax liability |  | US$  | 34,380 |   |      | US$ | 35,227 |  
|                                           |  |      |        |   |      |     |        |  



For financial
reporting purposes, a valuation allowance has been recognized to reflect managements estimate for realization of the deferred tax assets. Valuation allowances are provided when it is more likely than not that some or all of the deferred tax
assets will not be realized in the future. These evaluations are based on expectations of future taxable income and reversals of the various taxable temporary differences.



For Russian income tax purposes, VimpelCom has accumulated tax losses incurred in 2000, 2001 and 2002, which may be carried
forward for use against future income. Its use is restricted to a maximum of 30% of taxable income. Tax loss carry forwards may be eroded by future devaluation of the rouble. As of December 31, 2003, for Russian income tax purposes, VimpelCom-Region
had tax losses available to carry forward of approximately US$421, expiring on December 31, 2012.



F-40



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|22. | VALUATION AND QUALIFYING ACCOUNTS
|--- | ---------------------------------



The following summarizes the changes in the allowance for doubtful accounts for the years ended December 31, 2003, 2002 and 2001:



|                                |  |     |         |  
|------------------------------- |  | --- | ------- | -
|Balance as of December 31, 2000 |  | US$ | 6,979   |  
|Provision for bad debts         |  |     | 16,088  |  
|Accounts receivable written off |  |     | (14,469 | )
|                                |  |     |         |  
|Balance as of December 31, 2001 |  |     | 8,598   |  
|Provision for bad debts         |  |     | 25,408  |  
|Accounts receivable written off |  |     | (21,090 | )
|                                |  |     |         |  
|Balance as of December 31, 2002 |  |     | 12,916  |  
|Provision for bad debts         |  |     | 11,074  |  
|Accounts receivable written off |  |     | (16,032 | )
|                                |  |     |         |  
|Balance as of December 31, 2003 |  | US$ | 7,958   |  
|                                |  |     |         |  



The provision for bad
debts included in the accompanying consolidated statements of operations is net of related value-added taxes of US$1,846, US$4,235 and US$2,682 for the years ended December 31, 2003, 2002 and 2001, respectively.



|23. | RELATED PARTY TRANSACTIONS
|--- | --------------------------



Transactions between VimpelCom and its related parties, except for the transactions described below, consist primarily of services from the related
parties and loans to them, which are not material to the financial results of VimpelCom.



Balances due from related parties, which are equity investees, except for Telenor Russia AS, which is not an equity investees, consisted of the following as of December 31:



|                   |  |      |       |      |     |      
|------------------ |  | ---- | ----- | ---- | --- | -----
|                   |  | 2003 |       | 2002
|Bee-Line Togliatti |  | US$  | 1,013 |      | US$ | 1,411
|Other              |  |      | 158   |      |     | 672  
|                   |  |      |       |      |     |      
|                   |  | US$  | 1,171 |      | US$ | 2,083
|                   |  |      |       |      |     |      



The amount due from
Bee-Line Togliatti, a 50%-owned investee of Bee-Line Samara, mainly represents accounts receivable under the contract for telecommunications services.



Balances due to related parties consisted of the following as of December 31:



|                                |  |      |       |      |     |      
|------------------------------- |  | ---- | ----- | ---- | --- | -----
|                                |  | 2003 |       | 2002
|Telenor Russia AS               |  | US$  | 1,721 |      | US$ | 342  
|Eco Telecom and Alfa-Eco M      |  |      | 4,200 |      |     |     
|Alfa-Eco Telecom                |  |      | 1,400 |      |     |     
|Bee-Line Togliatti              |  |      | 532   |      |     | 1,823
|Telenor Invest AS               |  |      |      |      |     | 999  
|Telenor Mobile Communication AS |  |      | 750   |      |     | 395  
|FinMark Strategy Partners LLC   |  |      |      |      |     | 173  
|Other                           |  |      |      |      |     | 382  
|                                |  |      |       |      |     |      
|                                |  | US$  | 8,603 |      | US$ | 4,114
|                                |  |      |       |      |     |      



F-41



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On April 1, 1999, VimpelCom and Telenor Russia AS signed a Service Obligation Agreement
(Telenor Service Obligation Agreement). Total expense in respect of management fees under the Telenor Service Obligation Agreement included in selling, general and administrative expenses in the accompanying consolidated statements of
operations for the years ended December 31, 2003, 2002 and 2001 amounted to US$1,041, US$774 and US$525, respectively. As of December 31, 2003 and 2002, the liability to Telenor Russia AS amounted to US$321 and US$205, respectively.



On October 1, 2003, VimpelCom and Telenor Russia AS signed a General Services
Agreement. Total expense in respect of management fees under this General Services Agreement included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the years ended December 31, 2003,
2002 and 2001 amounted to US$1,167, US$0 and US$0, respectively. As of December 31, 2003 and 2002, the liability to Telenor Russia AS amounted to US$1,400 and US$0, respectively.



On August 28, 2003, VimpelCom and Eco Telecom and Limited Liability Company Alfa-Eco M (Alfa-Eco M), a part of
the Alfa Group of companies in Russia, signed a Services Agreement. In accordance with the Services Agreement, Eco Telecom and Alfa-Eco M are to provide advising and consulting services to VimpelCom in connection with the upcoming merger between
VimpelCom and VimpelCom-Region (Note 20). The total cost in respect of the Services Agreement as of December 31, 2003 amounted to US$3,500 and was included in telecommunications licenses and allocations of frequencies in the accompanying
consolidated financial statements. As of December 31, 2003, the liability to Eco Telecom and Alfa-Eco M was US$4,200.



On October 1, 2003, VimpelCom and Limited Liability Company Alfa-Eco Telecom, a part of the Alfa Group of companies in Russia, signed a General Service
Agreement. Total expense in respect of management fees under this General Service Agreement included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the years ended December 31, 2003,
2002 and 2001 amounted to US$1,167, US$0 and US$0, respectively. As of December 31, 2003 and 2002, the liability to Alfa-Eco Telecom amounted to US$1,400 and US$0, respectively.



The amount due to Bee-Line Togliatti mainly represents accounts payable under the contract for maintenance of
telecommunications equipment.



The amounts due to Telenor
Invest AS and Telenor Mobile Communication AS, companies registered in Norway and affiliated with Telenor, represent accounts payable by Extel and StavTeleSot for services under consultancy and other agreements.



On July 6, 2000, VimpelCom and AXF Consulting LLC, a US company controlled by
a director of VimpelCom, signed a Service Obligation Agreement, with an amendment concluded in May 2001. In October 2001, AXF Consulting LLC changed its name to FinMark Strategy Partners LLC (FinMark). In accordance with the Service
Obligation Agreement, FinMark provides advising and consulting services to VimpelCom. In accordance with an agreement between VimpelCom and FinMark, VimpelCom paid a fixed service fee to FinMark until December 31, 2002. The amount of the fee is
US$575 per annum, net of all applicable taxes. If the personnel accepted under the agreement ceases to have the status as a director of the Board of VimpelCom, then VimpelCom will have the right to suspend the services under the agreement and
withhold a pro rata portion of the annual fee. In May 2002, the personnel accepted under the agreement ceased to have the status as a director of the Board of VimpelCom. The total cost in respect of the Service Obligation Agreement recorded in the
accompanying consolidated financial statements for the years ended December 31, 2002 and 2001 amounted to US$690 and US$1,288, respectively. As of December 31, 2002, the liability to FinMark was US$173.



F-42



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On June 30, 2000, the Board of Directors of VimpelCom approved a transaction with one of executive
officers of VimpelCom (the Executive Officer). According to the agreement, VimpelCom was obliged to pay remuneration to the Executive Officer for the pledge of shares of VimpelComs common stock as a collateral for borrowings under
the credit line from Sberbank. The remuneration was calculated as 2% of the outstanding amount of borrowings under the credit line. The remuneration was paid to Executive Officer in two installments, in February and July 2001. Total remuneration
accrued and included in interest expense in the accompanying consolidated statements of operations for the years ended December 31, 2001 was US$171. In 2001, the shares of VimpelComs common stock were released from the pledge.



|24. | EARNINGS PER SHARE
|--- | ------------------



Net income per common share for all periods presented has been determined in accordance with SFAS No.128, Earnings per Share, by dividing
income available to common shareholders by the weighted average number of common shares outstanding during the period. Net income per share of common stock has been adjusted by a factor of 1.33 to determine net income per ADS equivalent as each ADS
is equivalent to three-quarters of one share of common stock.



The following table sets forth the computation of basic and diluted earnings per share:



|                                                                   |  |                                          |         |      |     |         |  |     |       
|------------------------------------------------------------------ |  | ---------------------------------------- | ------- | ---- | --- | ------- |  | --- | ------
|                                                                   |  | Years ended December 31,                
|                                                                   |  | 2003                                     |         | 2002 |     | 2001   
|                                                                   |  | (In thousands, except per share amounts)
|Numerator:                                                         |  |                                          |         |      |     |         |  |     |       
|Net income                                                         |  | US$                                      | 233,962 |      | US$ | 129,552 |  | US$ | 47,301
|Denominator:                                                       |  |                                          |         |      |     |         |  |     |       
|Denominator for basic earnings per share  weighted average shares |  |                                          | 38,241  |      |     | 38,014  |  |     | 33,642
|Effect of dilutive securities:                                     |  |                                          |         |      |     |         |  |     |       
|Convertible preferred stock                                        |  |                                          | 6,426   |      |     | 6,426   |  |     | 6,426 
|Senior convertible notes                                           |  |                                          | 2,076   |      |     |        |  |     |      
|Employee stock options                                             |  |                                          | 27      |      |     | 49      |  |     |      
|                                                                   |  |                                          |         |      |     |         |  |     |       
|Denominator for diluted earnings per share  assumed conversions   |  | US$                                      | 46,770  |      | US$ | 44,489  |  | US$ | 40,068
|                                                                   |  |                                          |         |      |     |         |  |     |       
|Basic net income per common share                                  |  | US$                                      | 6.12    |      | US$ | 3.41    |  | US$ | 1.41  
|                                                                   |  |                                          |         |      |     |         |  |     |       
|Diluted net income per common share                                |  | US$                                      | 5.22    |      | US$ | 2.91    |  | US$ | 1.18  
|                                                                   |  |                                          |         |      |     |         |  |     |       



The following items
were not included in the computation of earnings per share assuming dilution because they would not have a dilutive effect for the periods presented in the accompanying consolidated financial statements: senior convertible notes for the years ended
December 31, 2002 (2,080,926 notes) and 2001 (2,080,926 notes) and employee stock options for the year ended December 31, 2001.



|25. | SEGMENT INFORMATION
|--- | -------------------



SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, requires companies to provide certain information about
their operating segments. VimpelCom has two reportable segments: the Moscow license area and the regions outside of the Moscow license area (the Regions). The Moscow license area includes the city of Moscow and the Moscow region. The
Regions include all other regions of the Russian Federation.



F-43



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Management decided to organize the enterprise based on geographical areas. Management analyses the
reportable segments separately because of different economic environments and stages of development of markets of wireless telecommunications services in different geographical areas, requiring different investment and marketing strategies. The
Moscow license area represents a more developed market for VimpelComs services compared to the Regions.



The Board of Directors and management utilize more than one measurement and multiple views of data to measure segment performance. However, the dominant
measurements are consistent with VimpelComs consolidated financial statements and, accordingly, are reported on the same basis herein. Management evaluates the performance of its segments primarily based on revenue, operating income, income
before income taxes and net income along with cash flows and overall economic returns. Intersegment revenues are eliminated in consolidation. Intersegment revenues may be accounted for at amounts different from sales to unaffiliated companies. The
accounting policies of the segments are the same as those described in the summary of significant accounting policies, as discussed in Note 2.



|                                                        |  |                              |           |         |     |           |       |  |     |          
|------------------------------------------------------- |  | ---------------------------- | --------- | ------- | --- | --------- | ----- |  | --- | ---------
|                                                        |  | Year ended December 31, 2003
|                                                        |  | Moscow License Area          |           | Regions |     |           | Total
|Total operating revenues from external customers        |  | US$                          | 918,749   |         | US$ | 416,849   |       |  | US$ | 1,335,598
|Total intersegment revenues                             |  |                              | 58,450    |         |     | 42,506    |       |  |     | 100,956  
|Depreciation and amortization                           |  |                              | 120,511   |         |     | 64,826    |       |  |     | 185,337  
|Operating income                                        |  |                              | 325,768   |         |     | 103,199   |       |  |     | 428,967  
|Interest income                                         |  |                              | 11,611    |         |     | 1,478     |       |  |     | 13,089   
|Interest expense                                        |  |                              | 49,274    |         |     | 24,161    |       |  |     | 73,435   
|Income before income taxes and minority interest        |  |                              | 286,170   |         |     | 84,686    |       |  |     | 370,856  
|Income tax expense                                      |  |                              | 88,980    |         |     | 19,661    |       |  |     | 108,641  
|Net income                                              |  |                              | 197,190   |         |     | 62,422    |       |  |     | 259,612  
|Segment assets                                          |  |                              | 1,717,716 |         |     | 1,021,674 |       |  |     | 2,739,390
|Goodwill                                                |  |                              | 9,801     |         |     | 15        |       |  |     | 9,816    
|Expenditures for long-lived assets                      |  |                              | 234,578   |         |     | 538,077   |       |  |     | 772,655  
|                                                        | 
|                                                        |  | Year ended December 31, 2002
|                                                        |  | Moscow License Area          |           | Regions |     |           | Total
|Total operating revenues from external customers        |  | US$                          | 698,674   |         | US$ | 80,970    |       |  | US$ | 779,644  
|Total intersegment revenues                             |  |                              | 19,755    |         |     | 7,043     |       |  |     | 26,798   
|Depreciation and amortization                           |  |                              | 86,367    |         |     | 11,325    |       |  |     | 97,692   
|Operating income (loss)                                 |  |                              | 238,477   |         |     | (12,928   | )     |  |     | 225,549  
|Interest income                                         |  |                              | 8,110     |         |     | 381       |       |  |     | 8,491    
|Interest expense                                        |  |                              | 44,208    |         |     | 4,425     |       |  |     | 48,633   
|Income (loss) before income taxes and minority interest |  |                              | 199,759   |         |     | (21,975   | )     |  |     | 177,784  
|Income tax expense                                      |  |                              | 49,112    |         |     | 827       |       |  |     | 49,939   
|Net income (loss)                                       |  |                              | 150,644   |         |     | (23,192   | )     |  |     | 127,452  
|Segment assets                                          |  |                              | 1,411,948 |         |     | 532,492   |       |  |     | 1,944,440
|Goodwill                                                |  |                              | 9,801     |         |     | 15        |       |  |     | 9,816    
|Expenditures for long-lived assets                      |  |                              | 331,593   |         |     | 256,230   |       |  |     | 587,823  



F-44



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                                        |  |                              |         |         |     |         |       |  |     |          
|------------------------------------------------------- |  | ---------------------------- | ------- | ------- | --- | ------- | ----- |  | --- | ---------
|                                                        |  | Year ended December 31, 2001
|                                                        |  | MoscowLicense Area           |         | Regions |     |         | Total
|Total operating revenues from external customers        |  | US$                          | 416,936 |         | US$ | 10,960  |       |  | US$ | 427,896  
|Total intersegment revenues                             |  |                              | 3,451   |         |     | 1,013   |       |  |     | 4,464    
|Depreciation and amortization                           |  |                              | 59,266  |         |     | 2,104   |       |  |     | 61,370   
|Operating income (loss)                                 |  |                              | 94,363  |         |     | (6,695  | )     |  |     | 87,668   
|Interest income                                         |  |                              | 5,731   |         |     | 2       |       |  |     | 5,733    
|Interest expense                                        |  |                              | 26,528  |         |     | 337     |       |  |     | 26,865   
|Income (loss) before income taxes and minority interest |  |                              | 73,273  |         |     | (7,089  | )     |  |     | 66,184   
|Income tax expense (benefit)                            |  |                              | 18,629  |         |     | (90     | )     |  |     | 18,539   
|Net income (loss)                                       |  |                              | 55,049  |         |     | (6,981  | )     |  |     | 48,068   
|Segment assets                                          |  |                              | 888,753 |         |     | 162,106 |       |  |     | 1,050,859
|Goodwill                                                |  |                              | 9,801   |         |     |        |       |  |     | 9,801    
|Expenditures for long-lived assets                      |  |                              | 165,926 |         |     | 101,739 |       |  |     | 267,665  



A reconciliation of
VimpelComs total segment financial information to the corresponding consolidated amounts follows:



Revenues



|                                                                         |  |      |           |   |      |     |         |      |  |     |         |  
|------------------------------------------------------------------------ |  | ---- | --------- | - | ---- | --- | ------- | ---- |  | --- | ------- | -
|                                                                         |  | 2003 |           |   | 2002 |     |         | 2001 | 
|Total operating revenues from external customers for reportable segments |  | US$  | 1,335,598 |   |      | US$ | 779,644 |      |  | US$ | 427,896 |  
|Total intersegment revenues for reportable segments                      |  |      | 100,956   |   |      |     | 26,798  |      |  |     | 4,464   |  
|Elimination of intersegment revenues                                     |  |      | (100,956  | ) |      |     | (26,798 | )    |  |     | (4,464  | )
|                                                                         |  |      |           |   |      |     |         |      |  |     |         |  
|Total consolidated operating revenues                                    |  | US$  | 1,335,598 |   |      | US$ | 779,644 |      |  | US$ | 427,896 |  
|                                                                         |  |      |           |   |      |     |         |      |  |     |         |  



Net income (loss)



|                                                       |  |      |         |   |      |     |         |  |     |        |  
|------------------------------------------------------ |  | ---- | ------- | - | ---- | --- | ------- |  | --- | ------ | -
|                                                       |  |      |        
|                                                       |  | 2003 |         |   | 2002 |     | 2001    | 
|Total net income for reportable segments               |  | US$  | 259,612 |   |      | US$ | 127,452 |  | US$ | 48,068 |  
|Minority interest in net (income) loss of subsidiaries |  |      | (25,216 | ) |      |     | 2,090   |  |     |       |  
|Elimination of intersegment net (loss) income          |  |      | (434    | ) |      |     | 10      |  |     | (767   | )
|                                                       |  |      |         |   |      |     |         |  |     |        |  
|Net income                                             |  | US$  | 233,962 |   |      | US$ | 129,552 |  | US$ | 47,301 |  
|                                                       |  |      |         |   |      |     |         |  |     |        |  



Assets



|                                        |  |              |           |   |      |     |           |  
|--------------------------------------- |  | ------------ | --------- | - | ---- | --- | --------- | -
|                                        |  | December 31, |          
|                                        |  | 2003         |           |   | 2002 |    
|Total assets for reportable segments    |  | US$          | 2,739,390 |   |      | US$ | 1,944,440 |  
|Elimination of intercompany receivables |  |              | (437,158  | ) |      |     | (251,696  | )
|                                        |  |              |           |   |      |     |           |  
|Total consolidated assets               |  | US$          | 2,302,232 |   |      | US$ | 1,692,744 |  
|                                        |  |              |           |   |      |     |           |  



F-45



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Other significant items:



|                                                 |  |                              |         |             |     |        |                    |  |     |        
|------------------------------------------------ |  | ---------------------------- | ------- | ----------- | --- | ------ | ------------------ |  | --- | -------
|                                                 |  | Year ended December 31, 2003
|                                                 |  | SegmentTotals                |         | Adjustments |     |        | ConsolidatedTotals
|Depreciation and amortization                    |  | US$                          | 185,337 |             | US$ | (11    | )                  |  | US$ | 185,326
|Operating income                                 |  |                              | 428,967 |             |     | (1,063 | )                  |  |     | 427,904
|Interest income                                  |  |                              | 13,089  |             |     | (4,711 | )                  |  |     | 8,378  
|Interest expense                                 |  |                              | 73,435  |             |     | (5,189 | )                  |  |     | 68,246 
|Income before income taxes and minority interest |  |                              | 370,856 |             |     | (1,054 | )                  |  |     | 369,802
|Income tax expense                               |  |                              | 108,641 |             |     |       |                    |  |     | 108,641
|Expenditures for long-lived assets               |  |                              | 772,655 |             |     | (2,199 | )                  |  |     | 770,456



|                                                 |  |                              |         |             |     |         |                    |  |     |        
|------------------------------------------------ |  | ---------------------------- | ------- | ----------- | --- | ------- | ------------------ |  | --- | -------
|                                                 |  | Year ended December 31, 2002
|                                                 |  | SegmentTotals                |         | Adjustments |     |         | ConsolidatedTotals
|Depreciation and amortization                    |  | US$                          | 97,692  |             | US$ | (275    | )                  |  | US$ | 97,417 
|Operating income                                 |  |                              | 225,549 |             |     | (757    | )                  |  |     | 224,792
|Interest income                                  |  |                              | 8,491   |             |     | (1,322  | )                  |  |     | 7,169  
|Interest expense                                 |  |                              | 48,633  |             |     | (2,047  | )                  |  |     | 46,586 
|Income before income taxes and minority interest |  |                              | 177,784 |             |     | (87     | )                  |  |     | 177,697
|Income tax expense                               |  |                              | 49,939  |             |     |        |                    |  |     | 49,939 
|Expenditures for long-lived assets               |  |                              | 587,823 |             |     | (9,507  | )                  |  |     | 578,316
|                                                 | 
|                                                 |  | Year ended December 31, 2001
|                                                 |  | SegmentTotals                |         | Adjustments |     |         | ConsolidatedTotals
|Depreciation and amortization                    |  | US$                          | 61,370  |             | US$ | (64     | )                  |  | US$ | 61,306 
|Operating income                                 |  |                              | 87,668  |             |     | (518    | )                  |  |     | 87,150 
|Interest income                                  |  |                              | 5,733   |             |     |        |                    |  |     | 5,733  
|Interest expense                                 |  |                              | 26,865  |             |     |        |                    |  |     | 26,865 
|Income before income taxes and minority interest |  |                              | 66,184  |             |     | (337    | )                  |  |     | 65,847 
|Income tax expense                               |  |                              | 18,539  |             |     |        |                    |  |     | 18,539 
|Expenditures for long-lived assets               |  |                              | 267,665 |             |     | (12,656 | )                  |  |     | 255,009



|26. | STOCK OPTION PLAN
|--- | -----------------



VimpelComs 2000 Stock Option Plan adopted on December 20, 2000 authorized the grant of options to management personnel for up to 250,000 shares of
VimpelComs common stock. The following table summarizes the activity for the plan.



|                                       |  |                   |   |  |         |   |  |         |  
|-------------------------------------- |  | ----------------- | - |  | ------- | - |  | ------- | -
|                                       |  | Number of Options |  
|                                       |  | 2003              |   |  | 2002    |   |  | 2001    |  
|Options outstanding, beginning of year |  | 148,375           |   |  | 244,125 |   |  | 231,375 |  
|Options granted                        |  | 72,500            |   |  | 3,000   |   |  | 28,500  |  
|Options exercised                      |  | (120,750          | ) |  | (94,250 | ) |  |        |  
|Options forfeited                      |  | (1,500            | ) |  | (4,500  | ) |  | (15,750 | )
|                                       |  |                   |   |  |         |   |  |         |  
|Options outstanding, end of year       |  | 98,625            |   |  | 148,375 |   |  | 244,125 |  
|                                       |  |                   |   |  |         |   |  |         |  
|Options exercisable, end of year       |  | 44,625            |   |  | 138,239 |   |  | 137,813 |  
|                                       |  |                   |   |  |         |   |  |         |  



F-46



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



No options expired in the years ended December 31, 2003 and 2002. The following table summarizes the
weighted-average exercise prices of options for each of the following groups of options:



|                                       |  |                                  |       |                   |     |           |  |                   |       |           |     |                   |  |     |       |  |     |      
|-------------------------------------- |  | -------------------------------- | ----- | ----------------- | --- | --------- |  | ----------------- | ----- | --------- | --- | ----------------- |  | --- | ----- |  | --- | -----
|                                       |  | Weighted-Average Exercise Prices
|                                       |  | 2003                             |       | 2002              |     | 2001     
|                                       |  | Per share                        |       | Per ADSequivalent |     | Per share |  | Per ADSequivalent |       | Per share |     | Per ADSequivalent
|Options outstanding, beginning of year |  | US$                              | 23.60 |                   | US$ | 17.70     |  | US$               | 23.60 |           | US$ | 17.70             |  | US$ | 23.60 |  | US$ | 17.70
|Options granted                        |  |                                  | 46.13 |                   |     | 34.60     |  |                   | 23.60 |           |     | 17.70             |  |     | 23.60 |  |     | 17.70
|Options exercised                      |  |                                  | 25.32 |                   |     | 18.99     |  |                   | 23.60 |           |     | 17.70             |  |     | 23.60 |  |     | 17.70
|Options forfeited                      |  |                                  | 23.60 |                   |     | 17.70     |  |                   | 23.60 |           |     | 17.70             |  |     | 23.60 |  |     | 17.70
|                                       |  |                                  |       |                   |     |           |  |                   |       |           |     |                   |  |     |       |  |     |      
|Options outstanding, end of year       |  | US$                              | 38.40 |                   | US$ | 28.80     |  | US$               | 23.60 |           | US$ | 17.70             |  | US$ | 23.60 |  | US$ | 17.70
|                                       |  |                                  |       |                   |     |           |  |                   |       |           |     |                   |  |     |       |  |     |      
|Options exercisable, end of year       |  | US$                              | 28.75 |                   | US$ | 21.56     |  | US$               | 23.60 |           | US$ | 17.70             |  | US$ | 23.60 |  | US$ | 17.70
|                                       |  |                                  |       |                   |     |           |  |                   |       |           |     |                   |  |     |       |  |     |      



The weighted average
grant-date fair value of options granted during the years ended December 31, 2003, 2002 and 2001 was US$43.15 (US$32.36 per ADS equivalent), US$20.33 (US$15.25 per ADS equivalent) and US$11.63 (US$8.72 per ADS equivalent), respectively.



The options granted vest at varying rates over one to three year periods.
If certain events provided for in 2000 Stock Option Plan occur, the vesting period for certain employees is accelerated.



As of December 31, 2003, the weighted average contractual life of outstanding options was two years. VimpelCom can accelerate the expiration date.
VimpelCom recognizes compensation costs for awards with graded vesting schedules on a straight-line basis over two to three year periods.



The manner of exercise of stock options in the year ended December 31, 2003 required variable accounting for stock-based compensation under APB No. 25 and
related Interpretations. The amount of compensation expense in respect of 2000 Stock Option Plan included in the accompanying consolidated statements of operations was US$5,381 in the year ended December 31, 2003.



Pro forma information regarding net income (loss) and net income (loss) per
common share is required by SFAS No. 123, and has been determined as if VimpelCom has accounted for its employee stock options under the fair value method of that Statement. The fair value of these options was estimated at the dates of grant using a
Black-Scholes option pricing model with the following weighted-average assumptions.



|                                                                       |  |       |   |  |       |   |  |       |  
|---------------------------------------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                                                                       |  | 2003  |   |  | 2002  |   |  | 2001  |  
|Risk-free interest rate                                                |  | 1.7   | % |  | 1.4   | % |  | 3.1   | %
|Expected dividends yield                                               |  | 0.0   | % |  | 0.0   | % |  | 0.0   | %
|Volatility factor of expected market price of VimpelComs common stock |  | 0.943 |   |  | 1.002 |   |  | 1.070 |  
|Weighted average expected life of the options (years)                  |  | 3.25  |   |  | 2.0   |   |  | 2.0   |  



The Black-Scholes
option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because VimpelComs employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect
the fair value estimate, in managements opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.



F-47



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|27. | CONTINGENCIES AND UNCERTAINTIES
|--- | -------------------------------



The Russian economy while deemed to be of market status beginning in 2002, continues to display certain traits consistent with that of a market in
transition. These characteristics have in the past included higher than normal historic inflation, lack of liquidity in the capital markets, and the existence of currency controls which cause the national currency to be illiquid outside of Russia.
The continued success and stability of the Russian economy will be significantly impacted by the governments continued actions with regard to supervisory, legal, and economic reforms.



The taxation system in Russia is evolving as the central government
transforms itself from a command to a market oriented economy. There were many Russian Federation tax laws and related regulations introduced in 2003 and previous years which were not always clearly written and their interpretation is subject to the
opinions of the local tax inspectors, Central Bank officials and the Ministry of Finance. Instances of inconsistent opinions between local, regional and federal tax authorities and between the Central Bank and the Ministry of Finance are not
unusual. Management believes that it has paid or accrued all taxes that are applicable. Where uncertainty exists, VimpelCom has accrued tax liabilities based on managements best estimate.



As of December 31, 2003, VimpelCom does not believe that any material matters
exist relating to the developing markets and evolving fiscal and regulatory environment in Russia, including current pending or future governmental claims and demands, which would require adjustment to the accompanying financial statements in order
for those statements not to be misleading.



In the ordinary
course of business, VimpelCom may be party to various legal and tax proceedings, and subject to claims, certain of which relate to the developing markets and evolving fiscal and regulatory environments in which VimpelCom operates. In the opinion of
management, VimpelComs liability, if any, in all pending litigation, other legal proceeding or other matters other than what is discussed above, will not have a material effect upon the financial condition, results of operations or liquidity
of VimpelCom.



VimpelComs operations and financial
position will continue to be affected by Russian political developments including the application of existing and future legislation and tax regulations. The likelihood of such occurrences and their effect on VimpelCom could have a significant
impact on the VimpelComs ability to continue operations. VimpelCom does not believe that these contingencies, as related to its operations, are any more significant than those of similar enterprises in Russia.



VimpelComs ability to generate revenues in Moscow and the Moscow region
is dependent upon the operation of the wireless telecommunications networks under its licenses. VimpelComs AMPS/D-AMPS license to operate in the Moscow license area expires in November 2007, while the GSM license for the Moscow license area
expires in April 2008. Resolution No. 642, dated June 5, 1994, of the Government of the Russian Federation defines the circumstances under which a license may be revoked. Under this resolution, grounds for termination are both broad and subjective
and there is little precedent upon which to determine the practical likelihood of termination.



VimpelCom is dependent upon a small number of suppliers, principally Alcatel and Ericsson, for purchases of wireless telecommunications equipment. Similarly, there is only a small number of telephone line capacity
suppliers in Moscow. In the year ended December 31, 2003, VimpelCom purchases telephone line capacity primarily from two suppliers: Teleross and Digital Telephone Networks.



VimpelComs AMPS licenses to operate wireless networks in the regions (not including Moscow and the Moscow region)
include a condition to make non-returnable contributions to the development of the public



F-48



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



switched telecommunications network of the Russian Federation. The amount of contribution is unspecified and will be agreed with or determined by the
respective local administrations. VimpelCom has made no significant payments and it is not possible to determine the amount that will eventually become payable.



Moscow GSM License



On December 30, 2003, Gossvyaznadzor, an official body responsible for the compliance with the legislation and regulations in telecommunications industry,
issued Notices to each of VimpelCom and KBI ordering them to cure alleged violations of several government regulations, the Federal Law on Telecommunications, two provisions of the Civil Code of the Russian Federation (in the case of KBI) and
license provisions. KBI is a wholly-owned subsidiary of VimpelCom which holds the GSM-900/1800 license for the Moscow license area (Note 1). VimpelComs revenues related to this license were US$868,958, US$633,822 and US$322,173 for the years
ended December 31, 2003, 2002 and 2001, respectively.



The
Notices provided specific cure periods for many of the stated violations and required VimpelCom and KBI to notify Gossvyaznadzor of compliance with them. The Notices did not, however, specify the actions that VimpelCom and KBI must take to cure the
stated violations. In managements opinion, with the exception of the stated violation that KBI is disputing, VimpelCom and KBI have implemented measures to comply with the Notices within the stipulated cure periods that have passed to date and
have notified Gossvyaznadzor of that fact. The cure period for one point in the Notices is April 1, 2004 and the Company is in the process of complying with this point.



On January 22, 2004, KBI filed a motion with the Arbitration Court of Moscow to issue a preliminary injunction to suspend
Clause 5 of the Notice to KBI (Clause 5). KBI is disputing the portion of Clause 5 that alleges that KBI does not have agreements for provision of telecommunications services with the subscribers of its network and thereby violates
clause 1, article 779 of the Civil Code of the Russian Federation. On January 22, 2004, the Arbitration Court of Moscow issued a ruling satisfying KBIs motion for injunctive relief by suspending Clause 5. In a separate ruling on January 22,
2004, the Arbitration Court of Moscow accepted KBIs complaint challenging the validity of Clause 5. On March 18, 2004, the Moscow Arbitrazh Court ruled in favour of KBI and invalidated the relevant provision of the December 30, 2003 notice.
Gossvyaznadzor attempted to bring the Moscow Prosecutors office into the case as third parties, but this motion was defeated. Gossvyaznadzor can appeal this decision and it has publicly stated that it intends to appeal.



Management cannot make an estimate of the effects of the ultimate resolution
of the matters described above on VimpelComs consolidated financial statements.



F-49



---

##### Table of Contents

OPEN JOINT STOCK COMPANY VIMPEL-COMMUNICATIONS



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|28. | QUARTERLY FINANCIAL DATA (UNAUDITED)
|--- | ------------------------------------



The following table sets forth selected highlights for each of the fiscal quarters during the years ended December 31, 2003 and 2002 (US dollars in
thousands, except per share data):



|                                      |  |          |         |         |     |              |  |             |         |      |     |         |  |     |          
|------------------------------------- |  | -------- | ------- | ------- | --- | ------------ |  | ----------- | ------- | ---- | --- | ------- |  | --- | ---------
|                                      |  | March 31 |         | June 30 |     | September 30 |  | December 31 |         | Year
|2003                                  |  |          |         |         |     |              |  |             |         |      |     |         |  |     |          
|Net operating revenues                |  | US$      | 244,437 |         | US$ | 304,440      |  | US$         | 378,981 |      | US$ | 407,740 |  | US$ | 1,335,598
|Operating income                      |  |          | 68,886  |         |     | 97,277       |  |             | 126,707 |      |     | 135,034 |  |     | 427,904  
|Net income                            |  |          | 41,387  |         |     | 52,647       |  |             | 72,190  |      |     | 67,738  |  |     | 233,962  
|Net income per common share  basic   |  |          | 1.09    |         |     | 1.38         |  |             | 1.89    |      |     | 1.75    |  |     | 6.12     
|Net income per common share  diluted |  |          | 0.93    |         |     | 1.18         |  |             | 1.61    |      |     | 1.48    |  |     | 5.22     
|                                      |  |          |         |         |    
|2002                                  |  |          |         |         |     |              |  |             |         |      |     |         |  |     |          
|Net operating revenues                |  | US$      | 145,060 |         | US$ | 173,381      |  | US$         | 221,077 |      | US$ | 228,978 |  | US$ | 768,496  
|Operating income                      |  |          | 44,320  |         |     | 49,876       |  |             | 76,136  |      |     | 54,460  |  |     | 224,792  
|Net income                            |  |          | 28,046  |         |     | 21,941       |  |             | 40,487  |      |     | 39,078  |  |     | 129,552  
|Net income per common share  basic   |  |          | 0.74    |         |     | 0.58         |  |             | 1.06    |      |     | 1.03    |  |     | 3.41     
|Net income per common share  diluted |  |          | 0.63    |         |     | 0.49         |  |             | 0.91    |      |     | 0.88    |  |     | 2.91     



|29. | SUBSEQUENT EVENTS
|--- | -----------------



In January 2004, VimpelCom changed the estimated useful life of GSM telecommunications equipment from 9.5 to 7 year. The change will decrease net income
for the year ended December 31, 2004 by approximately US$40,000. This change occurred due to VimpelComs continuing evaluation of its use of various technologies combined with the January 2004 announcements of the plans of the Russian
Government to initiate the process of awarding licenses for new mobile communications technologies.



On February 24, 2004, Svenska Handelsbanken AB provided a seven-year, US dollar denominated, credit line of US$69,700 to VimpelCom-Region.
VimpelCom-Region has the right to draw down the entire amount before November 10, 2004. The loan is to be repaid in fourteen equal instalments, on a semi-annual basis, commencing not later than November 20, 2004. The loan bears interest at an annual
rate of LIBOR rate plus 0.325%.



On February 24, 2004,
VimpelCom-Region and Svenska Handelsbanken AB signed a pledge agreement. Under the pledge agreement, all the equipment with respective software received under Supply Contract with Ericsson AB is to be pledged as security for the obligations under
the Svenska Handelsbanken AB credit agreement.



VimpelCom
irrevocably and unconditionally guarantees twenty percent of VimpelCom-Regions obligations under the credit agreement with Svenska Handelsbanken AB.



F-50