##### Table of Contents



UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission file number: 0-27423
 Golden Telecom, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
(State of incorporation)
    
    51-0391303
(I.R.S. Employer Identification No.)
 REPRESENTATION OFFICE OF GOLDEN TELESERVICES, INC.
1 Kozhevnichesky Proezd
Moscow, Russia 115114
 (011-7-495) 797-9300
 Title of each class:
    
    Name of each exchange on which registered:Common Stock, $0.01 par value per share
    
    NASDAQ Global Select Market
 Securities registered pursuant to Section 12(g) of the Act: None
 þ o
 o þ
 þ o
 o
  o þ o
 o þ
   Item of Form 10-K
    
    Documents Incorporated By ReferencePart III, Items 10-14
    
    Portions of the Registrants
proxy statement for the 2007 annual meeting of shareholders to be
held inMay 2007.




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##### 



GOLDEN TELECOM, INC.
FORM 10-K
Year Ended December 31, 2006
 TABLE OF CONTENTS
 PagePART IITEM 1. Business
    
    3ITEM 1A. Risk Factors
    
    31ITEM 1B. Unresolved Staff Comments
    
    41ITEM 2. Properties
    
    42ITEM 3. Legal Proceedings
    
    42ITEM 4. Submission of Matters to a Vote of Security Holders
    
    42PART IIITEM 5. Market for the Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
    
    43ITEM 6. Selected Financial Data
    
    44ITEM 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    46ITEM 7A. Qualitative and Quantitative Disclosures About Market Risk
    
    72ITEM 8. Financial Statements and Supplementary Data
    
    74ITEM 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    106ITEM 9A. Control and Procedures
    
    106ITEM 9B. Other Information
    
    108PART IIIITEM 10. Directors and Executive Officers of the Registrant
    
    109ITEM 11. Executive Compensation
    
    109ITEM 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
    
    109ITEM 13. Certain Relationships and Related Transactions
    
    109ITEM 14. Principal Accountant Fees and Services
    
    109PART IVITEM 15. Exhibits and Financial Statement Schedules
    
    110SIGNATURES
    
    113Employment AgreementSchedule of Compensation Arrangements with DirectorsSubsidiariesConsent of Ernst & Young LLCCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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##### Table of Contents



PART I
 
 ITEM 1. Business
 Introduction
   
    
    Business and Corporate Services. Using our fiber optic and satellite-based networks in
and between major metropolitan areas of Russia, Ukraine and other countries of the CIS, we
provide business and corporate services including voice and data services to corporate
clients across all geographical markets and all industry segments, other than
telecommunications operators;
    
    Carrier and Operator Services.Using our fiber optic and satellite-based networks in and
between major metropolitan areas of Russia, Ukraine and other countries of the CIS, we
provide a range of carrier and operator services including voice and data services to
foreign and Russian telecommunications and mobile operators;
    
    Consumer Internet Services.Using our fiber optic and satellite-based networks, we
provide Internet access to the consumer market and web content offered through a family of
Internet portals throughout Russia, Ukraine, Kazakhstan, and Uzbekistan; and
    
    Mobile Services. Using our mobile networks in Kiev and Odessa, Ukraine, we provide mobile
services with value-added features, such as voicemail, roaming and messaging services on a
subscription and prepaid basis.
  Business Section Overview
  Business Strategy
  
    
    Increase Market Share by Offering Bundled Data and Voice Services Over an Integrated
Network
  
    
    Extend Our Leading Position in High Growth Data and Internet Markets
  3




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
    
    Reduce Operating Costs and Satisfy Capacity Needs through Network Planning and
Optimization
  
    
    Focus Operating Activities and Capital Investments in Major Metropolitan Areas
  
    
    Pursue Consolidation Opportunities
  Our Position in the Russian and CIS Markets
  
    
    our early market entry and local market experience;
    
    our focus on service, quality and reliability;
    
    our strong infrastructure position in major cities throughout Russia, Ukraine, Kazakhstan and Uzbekistan;
    
    our extensive customer base;
    
    our extensive range of integrated voice, data and Internet telecommunications services;
    
    our diverse and influential shareholder base; and
    
    our strong balance sheet position.
 Corporate History and Development
 Golden Telecom, Inc.,
    4




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Regulatory Environment
 Russia
   5




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6




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Ukraine
     Customer Base
   Corporate Network Customers.
 Corporate End-Users.
 Small and Medium Businesses (SMB).
 Fixed-Line Operators.
 7




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Cellular Operators.
 Mass Market.
  Pricing
  Our Service Groups
  Business and Corporate Services (BCS)
 BCS Services in Russia
  Services and Customers
 Local Access Services.
 International and Domestic Long Distance Services
  8




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Dedicated Internet and Data Services.
 Integrated Voice and Data Services.
 Value-Added Services.
 Equipment Sales.
  Marketing and Pricing
  ,
   9




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Competition
  
    
    Comstar-UTS, a subsidiary of Sistema Telecom, including Moscow City Telephone Network
(MGTS) for all services provided to corporate customers and the SMB market in Moscow;
    
    Equant, trading as Orange Business Services, a subsidiary of France Telecom, for
corporate data networking services across Russia;
    
    TransTelecom, currently owned by the Russian Railways, for corporate data networking services across Russia;
    
    Peterstar, an affiliate of Telecominvest, for services provided in St. Petersburg; and
    
    Regional subsidiaries of Svyazinvest, a holding group with a majority government
ownership, for services provided in St. Petersburg and within Russian regional cities.
 BCS Services in Ukraine
      Services and Customers
 Local Access Services.
 10




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International and Domestic Long Distance Services.
 Dedicated Internet and Data Services.
 Voice over Data Services.
 Information Services.
 Call Center Services.
 Residential Telecommunications Services.
 FMC Services.
  Marketing and Pricing
   Competition
   11




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Carrier and Operator Services
 Carrier and Operator Services in Russia
       Services and Customers
 Voice Services:
 12




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Data Services:
     Marketing and Pricing
  13




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Competition
    Carrier and Operator Services in Ukraine
 Services and Customers.
 International and Domestic Long Distance Services.
  14




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Marketing and Pricing
    Competition
  Consumer Internet Services
 Services and Customers
 Broadband Internet Access.
 Asymmetric Digital Subscriber Line (ADSL) Services.
 FTTB Services.
 Wireless Internet Access.
 15




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VoIP.
 Dial-up Internet Services.
  Internet Portals.
 Marketing and Pricing
     Competition
  16




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Mobile Services
 Golden Telecom GSM
   Services and Customers
 Mobile Services.
  Marketing and Pricing
     17




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Competition
     Website Access to Company Filings
 http://www.goldentelecom.com http://www.sec.gov
 Employees
   18




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Our Licenses and Network Facilities
 Significant Licenses
  License
    
    License Region (s)
    
    License Number
    
    Expiration DateLocal Communications ServicesSovintel
    
    Moscow, St. Petersburg
    
    
    44382
    
    
    September 21, 2011GTU
    
    Kiev, Kiev Region, Odessa, Odessa Region
    
    
    223391
    
    
    December 31, 2007GTU
    
    Ukraine (excluding Kiev, Kiev Region, Odessa,
Odessa Region)
    
    
    223392
    
    
    January 28, 2009ADS
    
    Nizhny Novgorod Region
    
    
    35438
    
    
    October 05, 2010Buzton
    
    Uzbekistan
    
    
    0000663
    
    
    July 4, 2011Samara Telecom
    
    Samara Region
    
    
    42681
    
    
    July 28, 2011Sakhalin Telecom
    
    Sakhalin Region
    
    
    35317
    
    
    October 5, 2010Kubtelecom
    
    Krasnodar Region
    
    
    37074
    
    
    December 12, 2010Leased Communications CircuitsSovintel 
Rascom 
Rascom
    
    Moscow, Moscow Region, St. Petersburg,
Leningrad Region 
Moscow, St. Petersburg, Leningrad Region,
Moscow Region, N. Novgorod Region, Tver
Region 
St. Petersburg, Leningrad Region and outside
Russian Federation
    
    
    41506
33126
43354
    
    
    July 5, 2011
June 8, 2010
July 28, 2011Voice Communication Services in Data Transmission NetworksSovintel
    
    Russian Federation
    
    
    39543
    
    
    March 15, 2011International, National, Intra-Zonal and Local
Communications ServicesSovintel
    
    Moscow, St. Petersburg,
Leningrad Region, Moscow Region, Pskov
Region, Kaliningrad Region
    
    
    14479
    
    
    March 17, 2008International and National Communications ServicesSovintel
    
    Russian Federation
    
    
    32041
    
    
    May 31, 2012GTU
    
    Kiev, Odessa, Odessa Region, Donetsk, Donetsk
Region, Kharkov, Kharkov Region, Lvov, Lvov
Region, Dnepropetrovsk, Dnepropetrovsk Region
    
    
    223393
    
    
    December 31, 2013GTU
    
    Ukraine (excluding Kiev, Odessa, Odessa
Region, Donetsk, Donetsk Region, Kharkov,
Kharkov Region, Lvov, Lvov Region,
Dnepropetrovsk, Dnepropetrovsk Region)
    
    
    223394
    
    
    January 28, 2014Mobile Communications ServicesGTU
    
    Kiev, Kiev Region
    
    
    223389
    
    
    December 31, 2007GTU
    
    Ukraine (excluding Kiev, Kiev Region)
    
    
    223390
    
    
    January 28, 2009Telematic ServicesSovintel
    
    Moscow, Moscow Region, St. Petersburg,
Leningrad Region
    
    
    27309
    
    
    August 18, 2008ADS
    
    Nizhny Novgorod Region
    
    
    37603
    
    
    December 23, 2010Dicom
    
    Moscow, Moscow Region
    
    
    40966
    
    
    July 5, 2011Samara Telecom
    
    Samara Region
    
    
    32138
    
    
    April 29, 2010
 19




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License
    
    License Region (s)
    
    License Number
    
    Expiration DateIntra-zonal Communications ServicesSovintel
    
    Moscow, St. Petersburg
    
    
    45074
    
    
    October 24, 2011ADS
    
    Nizhny Novgorod Region
    
    
    35439
    
    
    October 5, 2010Samara Telecom
    
    Samara Region
    
    
    43357
    
    
    July 19, 2011Sakhalin Telecom
    
    Sakhalin Region
    
    
    32478
    
    
    June 17, 2010Kubtelecom
    
    Krasnodar Region
    
    
    37254
    
    
    December 12, 2010Data Transmission ServicesSovintel
    
    Moscow, Moscow Region, St. Petersburg,
Leningrad Region
    
    
    27310
    
    
    August 18, 2008Buzton
    
    Uzbekistan
    
    
    0000664
    
    
    August 29, 2011SA-Telcom
    
    Kazakhstan
    
    
    0000032
    
    
    UnlimitedRadio FrequenciesS-Line
    
    Kiev, Sevastopol, Dnepropetrovsk Region,
Donetsk Region, Kharkov Region, Odessa
Region, Zaporozhye Region, Kiev Region,
Lugansk Region, Lvov Region, Poltava Region,
Vinnitsa Region, Zhitomir Region, Suma
Region, Kherson Region, Khmelnitsk Region,
Ivano-Frankovsk Region, Volyn Region,
Zakarpatye Region, Kirovograd Region, Rovno
Region, Ternopol Region, Cherskassk Region,
Chernigov Region, Chernovets Region, Crimea
    
    
    222995
    
    
    April 20, 2016
 Network Facilities
      Russia
 Backbone Network
  20




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International backbone
   Domestic backbone
   Satellite
   Voice Services
    Metropolitan Area Networks
  Moscow
  Transport.
 21




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Voice.
   Wireless Local Loop (WLL)
  Data and IP services .
   St. Petersburg
    Nizhny Novgorod
  Voronezh
  22




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Ekaterinburg
  Krasnoyarsk
  Samara
  Kaliningrad
  Sakhalin
  Krasnodar
  Other Regional Local Networks
  Dial-up Internet Local Access Network.
 Commonwealth of Independent States
 Ukraine
  Kiev
  23




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Other Regional Local Networks
  Kazakhstan
  Uzbekistan
  24




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The Environment in Which We Operate
  
    
    An overview of the telecommunications markets;
    
    An overview of the political and economic environment; and
    
    An overview of the legal, tax and regulatory regimes.
 Overview of Telecommunications Markets in Russia and Ukraine
 The Telecommunications Market in Russia
      25




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The Telecommunications Market in Ukraine.
      26




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Overview of the Political and Economic Environments in Russia and Ukraine
 Russias Political Environment.
  Russias Economic Environment.
 Ukraines Political Environment.
   Ukraines Economic Environment.
 27




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Overview of the Legal, Tax and Regulatory Regimes in Russia and Ukraine
 Russias Legal, Tax and Regulatory Regime.
         28




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Ukraines Legal, Tax, and Regulatory Regime
      29




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30




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ITEM 1A . Risk Factors
 Factors That May Adversely Affect Future Results
 Risks Associated With Doing Business in Russia, Ukraine and
Other Countries of the CIS
  Political instability in the countries in which we operate could depress foreign and local
investment and spending, which could adversely affect our results of operations
  There is a volatile political situation in Ukraine which may negatively impact our business
  Economic instability in Russia and Ukraine could adversely affect the demand for our services and
our ability to collect on our invoices
   The currency control system of Russia and Ukraine could adversely affect our ability to convert
rubles and hryvnas to hard currency and manage cash flows
   31




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The Russian banking and financial system remains underdeveloped, and another banking crisis could
place liquidity constraints on our business and adversely affect our financial condition
   Russian and Ukrainian telecommunications policies could affect our competitive position
   
    
    Restrictions on how and where we can provide our services;
    
    Restrictions or delays in receiving approvals on our applications and communications for
necessary regulatory approvals for rolling out our network in the regions for which we have
licenses;
    
    Significant additional costs;
    
    Suspension or revocation of licenses necessary to operate;
    
    Delays in implementing our operating or business plans; or
    
    Increased competition.
   The Telecommunications Law and regulations provide scope for the incumbent operators to raise
access costs
  32




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Our operating licenses may not clearly authorize us to provide all of the services that we offer
  Competing
commercial interests with  ties to the government officials could
harm our business
  Review of our operations by the Russian Prosecutor Generals office could disrupt our operations
  Special fees and taxes levied against telecommunications operators could adversely affect our
results of operations
   Russian and Ukrainian legislation may not adequately protect against expropriation and
nationalization
  
    
    The lack of state budgetary resources;
    
    The lack of an independent judiciary and sufficient mechanisms to enforce judgments;
    
    Corruption among government officials; and
    
    That any compensation amount would be fair or approximate
market value
   33




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We may be unable to enforce our rights due to ambiguity in the laws and legal structures of the
countries where we operate
  Any unforeseen changes in the tax laws in Russia or Ukraine could have a material adverse effect on
our business
   Russian and Ukrainian laws may expose us to liability for actions taken by our subsidiaries or
venture entities
    34




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§
    
    The subsidiary or 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 venture entity as a result
of our ownership interest, the terms of a contract between us and them, or in any other
way.
   Risks Associated with Our Business
 We may encounter difficulties expanding and operating our business, including the integration of
acquired companies
   §
    
    The consolidation of the operations and personnel of the acquired companies;§
    
    The potential disruption of our ongoing business and distraction of management;§
    
    The introduction of acquired technology content or rights into our products and
unanticipated expenses related to such integration;§
    
    The potential negative impact on reported earnings;§
    
    The possibility that revenues from acquired businesses and other synergies may not materialize as anticipated;§
    
    The deterioration of relationships with employees and customers as a result of any
integration of new management personnel; and§
    
    Contingent liabilities associated with acquired businesses, especially in the markets
where we operate.
   §
    
    Delivering services that are technically and economically feasible;§
    
    Financing increases in the regional network construction and development area;§
    
    Obtaining in a timely manner and maintaining licenses, permissions to operate
telecommunications equipment, frequency allocations and other governmental permissions
sufficient to provide services to our customers;§
    
    Marketing our services in a large geographic area to new potential customers;§
    
    Obtaining sufficient interconnect arrangements;§
    
    Meeting demands of local special interest groups;§
    
    Obtaining compliance certificates for our telecommunications equipment in a timely and cost-efficient manner; and§
    
    Obtaining adequate supplies of network equipment.
 35




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Reorganizations in the Ukrainian telecommunications sector may have strengthened the position of
the monopoly incumbent and encouraged unfair competition
   
    
    We may have no effective recourse against the state monopoly carrier since the state
regulator controls and manages the monopoly carrier and the judiciary system is severely
underdeveloped and cannot be relied upon to protect and enforce unfair competition;
    
    A single Ukrainian self-regulating monopoly is able to create favorable market conditions
for itself and cause unfavorable conditions for us;
    
    Our ability to negotiate reasonable interconnection agreements and rates may suffer; and
    
    Any subsequent privatization of Ukrtelecom may bring in strong management and resources
from a major telecommunications operator, increasing its competitive strengths.
 Failure to obtain sufficient and reliable transmission capacity at reasonable costs could cause us
to incur losses
    Our ability to provide our services is dependent on securing and maintaining interconnection
agreements with Svyazinvest, Ukrtelecom and other facilities providers
   36




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Our network may not be able to support the growing demands of our customers
   Russian companies may be required to adopt a plan of liquidation when their net assets are negative
  We may have difficulty scaling and adapting our existing architecture to accommodate increased
traffic and technology advances
  We are in a competitive industry and our competitors may be more successful in attracting and
retaining customers
   37




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§
    
    Greater resources, market presence and network coverage;§
    
    Greater brand name recognition, customer loyalty and goodwill;§
    
    Control over domestic transmission lines and over access to these lines by other participants; and§
    
    Close ties to national and local regulatory authorities which may be reluctant to adopt
policies that would give rise to increased competition for Svyazinvest or Ukrtelecom.
  Our existing billing and management information systems may not be able to meet our future needs
     Our ability to close certain transactions or develop the acquired businesses will determine our
ability to develop our broadband strategy
   38




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We may
encounter difficulties in fully complying with applicable laws due to
confusion and contradictions in the laws
and legal structures of the countries where we operate
      Our telecommunications licenses may not be extended or may be suspended or revoked
   39




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We may fail to obtain renewals or extensions of our frequency allocations for our earth stations
and other radio frequency equipment that we use in our operations
   Certain of our loan agreements contain restrictive covenants
  We may lose a majority stake of Kubtelecom
  Risks Associated With Our Shareholder Structure
 Our significant shareholders have other interests which may conflict with our interests
  Alfas dispute with the Russian Ministry of Telecommunications may adversely affect our business
  40




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Certain disagreements between our shareholders may adversely affect our business
  Our significant shareholders have entered into a Shareholders Agreement whereby these shareholders
exercise substantial control over our Board of Directors
  Risks Associated With Our Shares of Common Stock
 Our ability to pay dividends on our common stock may be limited
  Our share price has been and may continue to be highly volatile
  §
    
    Issues concerning the perceived risks of investing in Russia and the CIS, including
significant ownership of our shares by a company that is part of a large Russia-based
financial and industrial concern;§
    
    The limited number of our shares available for trading in public markets;§
    
    The potential sale of any large blocks of our shares by our management or large
shareholders, including the shares to be issued as part of the consideration for the
Corbina transaction;§
    
    Mergers and strategic alliances in the telecommunications industry; and§
    
    Inconsistent or restrictive government regulation in the Russian and Ukrainian telecommunications industries.
  
 Item 1B. Unresolved Staff Comments
  41




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Item 2. Properties
              
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  42




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PART II
 
 Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
 a) Market Information
  High
    
    Low2005:First quarter
    
    $
    31.25
    
    
    $
    25.41Second quarter
    
    
    30.75
    
    
    
    25.36Third quarter
    
    
    31.57
    
    
    
    27.52Fourth quarter
    
    
    31.62
    
    
    
    25.592006:First quarter
    
    $
    31.00
    
    
    $
    27.01Second quarter
    
    
    32.00
    
    
    
    21.73Third quarter
    
    
    31.89
    
    
    
    22.09Fourth quarter
    
    
    47.56
    
    
    
    30.49
 b) Holders
  c) Dividends
  d) Recent Sales of Unregistered Securities
   43




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Item 6. Selected Financial Data
   For the Years Ended December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006(in thousands, except per share data)Statement of Operations Data:Revenues
    
    $
    198,727
    
    
    $
    360,534
    
    
    $
    583,978
    
    
    $
    667,379
    
    
    $
    854,617Cost of revenues (excluding
depreciation and amortization)
    
    
    91,189
    
    
    
    181,085
    
    
    
    300,588
    
    
    
    347,532
    
    
    
    474,389Gross margin
    
    
    107,538
    
    
    
    179,449
    
    
    
    283,390
    
    
    
    319,847
    
    
    
    380,228Selling, general and administrative
(excluding depreciation and
amortization)
    
    
    46,147
    
    
    
    64,384
    
    
    
    112,855
    
    
    
    119,890
    
    
    
    152,808Depreciation and amortization
    
    
    29,961
    
    
    
    45,334
    
    
    
    74,999
    
    
    
    84,015
    
    
    
    100,209Income (loss) from operations
    
    
    31,430
    
    
    
    69,731
    
    
    
    95,536
    
    
    
    115,942
    
    
    
    127,211Equity in earnings of ventures
    
    
    4,375
    
    
    
    4,687
    
    
    
    278
    
    
    
    460
    
    
    
    1,867Interest income (expense), net
    
    
    (667
    )
    
    
    (872
    )
    
    
    559
    
    
    
    1,677
    
    
    
    631Foreign currency gain (loss)
    
    
    (1,174
    )
    
    
    (232
    )
    
    
    660
    
    
    
    (1,212
    )
    
    
    1,697Minority interest
    
    
    527
    
    
    
    480
    
    
    
    1,506
    
    
    
    2,978
    
    
    
    4,808Provision for income taxes
    
    
    4,627
    
    
    
    17,399
    
    
    
    30,744
    
    
    
    37,816
    
    
    
    40,417Net income before
cumulative effect of change
in accounting principle
    
    
    28,810
    
    
    
    55,435
    
    
    
    64,783
    
    
    
    76,073
    
    
    
    86,181Cumulative effect of change in
accounting principle
    
    
    974
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    681Net income
    
    
    29,784
    
    
    
    55,435
    
    
    
    64,783
    
    
    
    76,073
    
    
    
    85,500Net income per share before
cumulative effect of change in
accounting principle  basic
    
    
    1.20
    
    
    
    1.95
    
    
    
    1.79
    
    
    
    2.09
    
    
    
    2.36Cumulative effect of change in
accounting principle
    
    
    0.04
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.02Net income per share  basic
    
    
    1.24
    
    
    
    1.95
    
    
    
    1.79
    
    
    
    2.09
    
    
    
    2.34Weighted average shares  basic
    
    
    24,102
    
    
    
    28,468
    
    
    
    36,226
    
    
    
    36,378
    
    
    
    36,591Net income per share before
cumulative effect of change in
accounting principle  diluted
    
    
    1.17
    
    
    
    1.90
    
    
    
    1.77
    
    
    
    2.08
    
    
    
    2.35Cumulative effect of change in
accounting principle
    
    
    0.04
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.02Net income per share  diluted
    
    
    1.21
    
    
    
    1.90
    
    
    
    1.77
    
    
    
    2.08
    
    
    
    2.33Weighted average shares  diluted
    
    
    24,517
    
    
    
    29,107
    
    
    
    36,553
    
    
    
    36,605
    
    
    
    36,717Cash dividends per common share
    
    
    
    
    
    
    
    
    
    
    0.80
    
    
    
    0.80
    
    
    
    0.60
 44




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##### Table of Contents



At December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006(in thousands)Balance Sheet Data:Cash and cash equivalents
    
    $
    59,625
    
    
    $
    65,180
    
    
    $
    53,699
    
    
    $
    67,176
    
    
    $
    18,413Property and equipment, net
    
    
    166,121
    
    
    
    283,110
    
    
    
    347,891
    
    
    
    407,907
    
    
    
    552,341Investments in and advances to ventures
    
    
    721
    
    
    
    251
    
    
    
    742
    
    
    
    10,889
    
    
    
    11,886Goodwill and intangible assets, net
    
    
    127,669
    
    
    
    248,843
    
    
    
    247,570
    
    
    
    243,129
    
    
    
    297,084Total assets
    
    
    435,810
    
    
    
    729,226
    
    
    
    805,768
    
    
    
    882,211
    
    
    
    1,107,190Long-term debt, including long-term
capital lease obligations
    
    
    29,732
    
    
    
    3,963
    
    
    
    1,738
    
    
    
    2,367
    
    
    
    1,620Minority interest
    
    
    2,187
    
    
    
    2,722
    
    
    
    11,738
    
    
    
    19,693
    
    
    
    31,263Shareholders equity
    
    
    311,506
    
    
    
    584,279
    
    
    
    626,381
    
    
    
    675,103
    
    
    
    817,176
       45




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##### Table of Contents



ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   
    
    Business and Corporate Services (BCS)Using our fiber optic and satellite-based
networks in and between major metropolitan areas of Russia, Ukraine and other countries of
the CIS, we provide business and corporate services including voice and data services to
corporate clients across all geographical markets and all industry segments, other than
telecommunications operators;
    
    Carrier and Operator Services.Using our fiber optic and satellite-based networks in and
between major metropolitan areas of Russia, Ukraine and other countries of the CIS, we
provide a range of carrier and operator services including voice and data services to
foreign and Russian telecommunications and mobile operators;
    
    Consumer Internet Services.Using our fiber optic and satellite-based networks, we
provide Internet access to the consumer market and web content offered through a family of
Internet portals throughout Russia, Ukraine, Kazakhstan, and Uzbekistan; and
    
    Mobile Services. Using our mobile networks in Kiev and Odessa, Ukraine, we provide mobile
services with value-added features, such as voicemail, roaming and messaging services on a
subscription and prepaid basis.
     Recent Acquisitions
  46




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47




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Regulatory Developments
    48




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49




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##### Table of Contents



Other Developments
    50




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Highlights and Outlook
       51




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52




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##### Table of Contents



Critical Accounting Policies
  Revenue recognition policie
 53




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##### Table of Contents



Allowance for doubtful accounts policies
 Long-lived asset recovery policies
 Goodwill and assessment of impairment Goodwill and Other Intangible Assets
 Valuation allowance for deferred tax asset
 Business segment information
 Functional currency Foreign Currency Translation" .
  Stock-based compensation;
 54




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##### Table of Contents



Critical Accounting Estimates
  Allowance for doubtful accounts;
 Tax provisions; Accounting for
Contingencies Accounting for Income Taxes
 Useful lives of property and equipment and certain intangible assets;
 Business combinations; Business Combinations
 Recent Accounting Pronouncements
 Accounting for Stock-Based
Compensation Accounting
for Stock Issued to Employees
 Share Based Payment Accounting for Stock Issued to Employees Statement of Cash Flows
  55




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##### Table of Contents



Results of Operations
   The discussion of our results of operations is organized as follows:
 
    
    Consolidated Results.Consolidated Results of Operations for the Year
Ended December 31, 2006, compared to the Consolidated Results of
Operations for the Year Ended December 31, 2005
    
    Consolidated Financial Position.Consolidated Financial Position at
December 31, 2006, compared to Consolidated Financial Position at
December 31, 2005
    
    Consolidated Results.Consolidated Results of Operations for the Year
Ended December 31, 2005, compared to the Consolidated Results of
Operations for the Year Ended December 31, 2004
    
    Consolidated Financial Position. Consolidated Financial Position at
December 31, 2005, compared to Consolidated Financial Position at
December 31, 2004
 56




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##### Table of Contents



Consolidated Results  Consolidated Results of Operations for the Year Ended December 31, 2006,
Compared to the Consolidated Results of Operations for the Year Ended December 31, 2005
 Revenue
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Year
    
    
    For the YearEnded December 31, 2005
    
    
    Ended December 31, 2006(in millions)REVENUEBusiness and Corporate Services
    
    $
    387.4
    
    
    $
    487.2Carrier and Operator Services
    
    
    221.4
    
    
    
    309.1Consumer Internet Services
    
    
    44.5
    
    
    
    48.7Mobile Services
    
    
    14.1
    
    
    
    9.6TOTAL REVENUE
    
    $
    667.4
    
    
    $
    854.6
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Year
    
    
    For the YearEnded December 31, 2005
    
    
    Ended December 31, 2006(in millions)REVENUEMoscow
    
    $
    436.6
    
    
    $
    535.6Northwest region of Russia
    
    
    59.9
    
    
    
    79.6Other regions of Russia and CIS
    
    
    122.9
    
    
    
    185.9Ukraine
    
    
    73.8
    
    
    
    82.3Eliminations
    
    
    (25.8
    )
    
    
    (28.8
    )TOTAL REVENUE
    
    $
    667.4
    
    
    $
    854.6
 Business and Corporate Services.
  57




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##### Table of Contents



(in whole numbers)
    
    2005
    
    2006
    
    % ChangeBCS Moscow customer statistics on December 31:Total clients
    
    
    23,013
    
    
    
    23,456
    
    
    
    2
    %Business centers
    
    
    791
    
    
    
    920
    
    
    
    16
    %Trade centers
    
    
    68
    
    
    
    94
    
    
    
    38
    %Hotels
    
    
    48
    
    
    
    53
    
    
    
    10
    %Direct inward dialing lines
    
    
    127,000
    
    
    
    138,000
    
    
    
    9
    %Ethernet / Metropolitan Ethernet Network connections
    
    
    1,708
    
    
    
    2,652
    
    
    
    55
    %High speed Internet active contracts
    
    
    485
    
    
    
    976
    
    
    
    101
    %
    Carrier and Operator Services.
    Consumer Internet Services.
 58




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##### Table of Contents



Mobile Services.
 Expenses
  Consolidated Expenses
    
    
    Consolidated ExpensesFor the Year Ended
    
    
    For the Year EndedDecember 31, 2005
    
    
    December 31, 2006(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    165.7
    
    
    $
    213.4Carrier and Operator Services
    
    
    145.7
    
    
    
    218.4Consumer Internet Services
    
    
    29.9
    
    
    
    37.4Mobile Services
    
    
    6.2
    
    
    
    5.2TOTAL COST OF REVENUE
    
    
    347.5
    
    
    
    474.4Selling, general and administrative
    
    
    119.9
    
    
    
    152.8Depreciation and amortization
    
    
    84.0
    
    
    
    100.2Equity in earnings of ventures
    
    
    (0.4
    )
    
    
    (1.9
    )Interest income
    
    
    (2.3
    )
    
    
    (1.2
    )Interest expense
    
    
    0.6
    
    
    
    0.6Foreign currency (gain)/ loss
    
    
    1.2
    
    
    
    (1.7
    )Minority interest
    
    
    3.0
    
    
    
    4.8Provision for income taxes
    
    
    37.8
    
    
    
    40.4Cumulative effect of a change in
accounting principle, net of tax
    
    $
    
    
    
    $
    0.7
 Cost of Revenue
  Business and Corporate Services.
   59




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##### Table of Contents



Carrier and Operator Services.
    Consumer Internet Services.
  Mobile Services.
 Selling, General and Administrative
  Depreciation and Amortization
  60




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##### Table of Contents



Equity in Earnings of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Gain (Loss)
  Minority Interest
  Provision for Income Taxes
  Net Income and Net Income per Share
    61




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Consolidated Financial Position  Significant Changes in Consolidated Financial Position at
December 31, 2006, compared to Consolidated Financial Position at December 31, 2005
 Accounts Receivable
  Intangible Assets
  Other Non-Current Liabilities
  Minority Interest
  Stockholders Equity
  Consolidated Results  Consolidated Results of Operations for the Year Ended December 31, 2005,
Compared to the Consolidated Results of Operations for the Year Ended December 31, 2004
 Revenue
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Year
    
    
    For the YearEnded December 31, 2004
    
    
    Ended December 31, 2005(in millions)REVENUEBusiness and Corporate Services
    
    $
    324.8
    
    
    $
    387.4Carrier and Operator Services
    
    
    198.9
    
    
    
    221.4Consumer Internet Services
    
    
    45.5
    
    
    
    44.5Mobile Services
    
    
    15.8
    
    
    
    14.1Eliminations
    
    
    (1.0
    )
    
    
    TOTAL REVENUE
    
    $
    584.0
    
    
    $
    667.4
 Business and Corporate Services.
 62




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##### Table of Contents



1
 (in whole numbers)
    
    2004
    
    2005
    
    % ChangeBCS Moscow customer statistics on Dec 31:Total clients
    
    
    22,657
    
    
    
    23,013
    
    
    
    2
    %Business centers
    
    
    686
    
    
    
    791
    
    
    
    15
    %Trade centers
    
    
    50
    
    
    
    68
    
    
    
    36
    %Hotels
    
    
    45
    
    
    
    48
    
    
    
    7
    %Direct inward dialing lines
    
    
    116,668
    
    
    
    127,000
    
    
    
    9
    %Ethernet / Metropolitan Ethernet Network connections
    
    
    1,138
    
    
    
    1,708
    
    
    
    50
    %High speed Internet active contracts
    
    
    251
    
    
    
    485
    
    
    
    93
    %
    Carrier and Operator Services.
 2
 
 1
    
    For comparability, the amounts shown for
Sovintel in 2004 include adjustments to combine Sovintel and Comincom for the
full year of 2004 since Comincom was merged into Sovintel in December 2004.2
    
    For comparability, the amounts shown for
Sovintel in 2004 include adjustments to combine Sovintel and Comincom for the
full year of 2004 since Comincom was merged into Sovintel in December 2004. 63




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##### Table of Contents



Consumer Internet Services.
 Mobile Services.
 Expenses
  Consolidated Expenses
    
    
    Consolidated ExpensesFor the Year Ended
    
    
    For the Year EndedDecember 31, 2004
    
    
    December 31, 2005(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    141.2
    
    
    $
    165.7Carrier and Operator Services
    
    
    127.5
    
    
    
    145.7Consumer Internet Services
    
    
    26.9
    
    
    
    29.9Mobile Services
    
    
    6.0
    
    
    
    6.2Eliminations
    
    
    (1.0
    )
    
    
    TOTAL COST OF REVENUE
    
    
    300.6
    
    
    
    347.5Selling, general and administrative
    
    
    112.9
    
    
    
    119.9Depreciation and amortization
    
    
    75.0
    
    
    
    84.0Equity in earnings of ventures
    
    
    (0.3
    )
    
    
    (0.4
    )Interest income
    
    
    (1.1
    )
    
    
    (2.3
    )Interest expense
    
    
    0.6
    
    
    
    0.6Foreign currency (gain)/ loss
    
    
    (0.7
    )
    
    
    1.2Provision for income taxes
    
    $
    30.7
    
    
    $
    37.8
 64




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##### Table of Contents



Cost of Revenue
  Business and Corporate Services.
 3
   Carrier and Operator Services.
 3
   Consumer Internet Services.
 Mobile Services.
 Selling, General and Administrative
  
 3
    
    For comparability, amounts shown for
Sovintel in 2004 include adjustments to combine Sovintel and Comincom for the
full year of 2004 since Comincom was merged into Sovintel in December 2004. 65




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Depreciation and Amortization
  Equity in Earnings of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Gain (Loss)
  Minority Interest
  Provision for Income Taxes
  66




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##### Table of Contents



Net Income and Net Income per Share
    Consolidated Financial Position  Significant Changes in Consolidated Financial Position at
December 31, 2005, compared to Consolidated Financial Position at December 31, 2004
 Accounts Receivable
  Intangible Assets
  Other Non-Current Liabilities
  Minority Interest
  Stockholders Equity
  67




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##### Table of Contents



Income Taxes
  Liquidity and Capital Resources
  Consolidated Cash Flows
    
    
    Consolidated Cash FlowsFor the Year
    
    
    For the YearEnded December 31, 2005
    
    
    Ended December 31, 2006(in millions)CASH FLOWSProvided by operating activities
    
    $
    174.3
    
    
    $
    160.7Used in investing activities
    
    
    (133.1
    )
    
    
    (201.1
    )Used in financing activities
    
    
    (27.3
    )
    
    
    (9.8
    )Effect of exchange rate changes
    
    
    (0.4
    )
    
    
    1.4Net increase (decrease) in cash
and cash equivalents
    
    $
    13.5
    
    
    $
    (48.8
    )
       68




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69




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##### Table of Contents



Credit Rating Agency
    
    Rating
    
    
    OutlookStandard & Poors
    
    BB
    
    StableMoodys
    
    Ba3
    
    Stable
   Contractual Obligations
  Payments Due by Period (3)(in thousands)Less
    
    
    1 - 3
    
    
    4 - 5Total
    
    
    than 1 year
    
    
    years
    
    
    years
    
    
    ThereafterLong-term debt
    
    $
    29
    
    
    $
    
    
    
    $
    29
    
    
    $
    
    
    
    $
    Capital lease obligations
    
    
    2,583
    
    
    
    876
    
    
    
    1,707
    
    
    
    
    
    
    
    Non-cancelable lease
obligations
    
    
    28,645
    
    
    
    9,876
    
    
    
    14,550
    
    
    
    4,044
    
    
    
    175Purchase obligations (1)
    
    
    75,485
    
    
    
    27,985
    
    
    
    31,163
    
    
    
    10,976
    
    
    
    5,361Other long-term liabilities (2)
    
    
    2,321
    
    
    
    
    
    
    
    2,321
    
    
    
    
    
    
    
    Total
    
    $
    109,063
    
    
    $
    38,737
    
    
    $
    49,770
    
    
    $
    15,020
    
    
    $
    5,536
 
 (1)
    
    Purchase obligations primarily include our contractual legal obligations for the future
purchase of equipment, interconnect, and satellite transponder capacity.(2)
    
    Other long-term liabilities primarily include obligations related to the SARs we have
granted.(3)
    
    Amounts include interest. 70




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Special Note Regarding Forward Looking Statements
     71




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##### Table of Contents



ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk
         2006
    
    20052007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Total
    
    TotalCash equivalents
    
    $
    18,413
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    18,413
    
    
    $
    67,176Note receivable
    
    $
    2,879
    
    
    $
    
    
    
    $
    
    
    
    $
    2,500
    
    
    $
    
    
    
    $
    
    
    
    $
    2,879
    
    
    $
    1,494Average fixed rate
    
    
    9.8
    %
    
    
    
    
    
    
    
    
    
    
    10.0
    %
    
    
    
    
    
    
    
    
    
    
    9.8
    %
    
    
    7.0
    %Long-term debt,
including current
portionVariable rate
    
    $
    12,305
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,305
    
    
    $
    92Average interest rate
    
    
    10.5
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.5
    %
    
    
    
 72




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##### Table of Contents



2006
    
    20052007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Total
    
    TotalAssetsCurrent assets
Russian rubles
    
    $
    122,664
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    122,644
    
    
    $
    73,463Closing foreign
currency
exchange rate
    
    
    26.33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ukrainian Hryvna
    
    $
    11,068
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,068
    
    
    $
    7,135Closing foreign
currency
exchange rate
    
    
    5.05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kazakhstan Tenge
    
    $
    1,652
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,652
    
    
    $
    1,267Closing foreign
currency
exchange rate
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Uzbekistan Soom
    
    $
    1,948
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,948
    
    
    $
    1,073Closing foreign
currency
exchange rate
    
    
    1,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    LiabilitiesCurrent liabilities
Russian rubles
    
    $
    27,961
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    27,961
    
    
    $
    21,528Closing foreign
currency
exchange rate
    
    
    26.33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Ukrainian Hryvna
    
    $
    15,192
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    15,192
    
    
    $
    3,696Closing foreign
currency
exchange rate
    
    
    5.05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kazakhstan Tenge
    
    $
    35
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    35
    
    
    $
    57Closing foreign
currency
exchange rate
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Uzbekistan Soom
    
    $
    184
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    184
    
    
    $
    156Closing foreign
currency
exchange rate
    
    
    1,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  73




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##### Table of Contents



ITEM 8. Financial Statements and Supplementary Data
 INDEX TO FINANCIAL STATEMENTS
 GOLDEN TELECOM, INC.
 PageFinancial StatementsReport of Independent Registered Public Accounting Firm
    
    
    
    76Consolidated Balance Sheets as of December 31, 2005 and 2006
    
    
    
    77Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006
    
    
    
    79Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006
    
    
    
    80Consolidated Statements of Shareholders Equity for the years ended December 31, 2004, 2005 and 2006
    
    
    
    81Notes to Consolidated Financial Statements
    
    
    
    82
 74




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##### Table of Contents



AUDITED CONSOLIDATED FINANCIAL STATEMENTS
 GOLDEN TELECOM, INC.
Years Ended December 31, 2004, 2005 and 2006
With Report of Independent Registered Public Accounting Firm
 75




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       /s/ ERNST & YOUNG LLCMoscow,
RussiaMarch 15, 2007
 76




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
 December 31,2005
    
    
    2006ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    67,176
    
    
    $
    18,413Accounts receivable, net of allowance for doubtful accounts of
$27,327 and $25,224 at December 31, 2005 and 2006, respectively
    
    
    91,709
    
    
    
    147,719VAT receivable
    
    
    21,986
    
    
    
    21,486Prepaid expenses
    
    
    8,083
    
    
    
    11,371Deferred tax asset
    
    
    8,994
    
    
    
    11,098Other current assets
    
    
    13,009
    
    
    
    21,318TOTAL CURRENT ASSETS
    
    
    210,957
    
    
    
    231,405Property and equipment:Telecommunications equipment
    
    
    494,097
    
    
    
    707,431Telecommunications network held under capital leases
    
    
    32,538
    
    
    
    23,867Furniture, fixtures and equipment
    
    
    41,524
    
    
    
    50,217Other property
    
    
    16,374
    
    
    
    20,401Construction in progress
    
    
    70,470
    
    
    
    103,190655,003
    
    
    
    905,106Accumulated depreciation
    
    
    (247,096
    )
    
    
    (352,765
    )Net property and equipment
    
    
    407,907
    
    
    
    552,341Goodwill and intangible assets:Goodwill
    
    
    149,249
    
    
    
    180,539Telecommunications service contracts, net of accumulated amortization of
$32,009 as of December 31, 2005 and $49,450 as of December 31, 2006
    
    
    67,357
    
    
    
    69,983Contract-based customer relationships, net of accumulated amortization of
$18,241 as of December 31, 2005 and $28,578 as of December 31, 2006
    
    
    18,608
    
    
    
    13,526Licenses, net of accumulated amortization of $3,182 as of December 31, 2005
and $4,295 as of December 31, 2006
    
    
    3,994
    
    
    
    22,653Other intangible assets, net of accumulated amortization of $7,216 as of
December 31, 2005 and $7,991 as of December 31, 2006
    
    
    3,921
    
    
    
    10,383Net goodwill and intangible assets
    
    
    243,129
    
    
    
    297,084Restricted cash
    
    
    566
    
    
    
    233Other non-current assets
    
    
    19,652
    
    
    
    26,127TOTAL ASSETS
    
    $
    882,211
    
    
    $
    1,107,190
  77




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##### Table of Contents



GOLDEN TELECOM, INC.
 CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
 December 31,2005
    
    
    2006LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    89,404
    
    
    $
    146,058VAT Payable
    
    
    17,190
    
    
    
    2,725Current capital lease obligations
    
    
    1,941
    
    
    
    753Debt maturing within one year
    
    
    65
    
    
    
    12,305Deferred revenue
    
    
    16,799
    
    
    
    21,634Due to related parties
    
    
    2,470
    
    
    
    4,505Other current liabilities
    
    
    4,014
    
    
    
    611TOTAL CURRENT LIABILITIES
    
    
    131,883
    
    
    
    188,591Long-term debt, less current portion
    
    
    27
    
    
    
    29Long-term deferred tax liability
    
    
    22,287
    
    
    
    29,268Long-term deferred revenue
    
    
    30,878
    
    
    
    36,951Long-term capital lease obligations
    
    
    2,340
    
    
    
    1,591Other non-current liabilities
    
    
    
    
    
    
    2,321TOTAL LIABILITIES
    
    
    187,415
    
    
    
    258,751Minority interest
    
    
    19,693
    
    
    
    31,263SHAREHOLDERS EQUITYPreferred stock, $0.01 par value (10,000,000 shares
authorized; none issued and outstanding at December 31, 2005 and 2006)
    
    
    
    
    
    
    Common stock, $0.01 par value (100,000,000 shares authorized;
36,458,490 and 36,673,015 shares issued and outstanding at December 31,
2005 and 2006, respectively)
    
    
    365
    
    
    
    367Additional paid-in capital
    
    
    671,998
    
    
    
    674,993Deferred equity compensation
    
    
    (455
    )
    
    
    Retained earnings
    
    
    3,195
    
    
    
    66,744Accumulated other comprehensive income
    
    
    
    
    
    
    75,072TOTAL SHAREHOLDERS EQUITY
    
    
    675,103
    
    
    
    817,176TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    882,211
    
    
    $
    1,107,190
  78




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
 Year Ended December 31,2004
    
    
    2005
    
    
    2006REVENUE:Telecommunication services
    
    $
    581,521
    
    
    $
    662,742
    
    
    $
    846,740Revenue from related parties
    
    
    2,457
    
    
    
    4,637
    
    
    
    7,877TOTAL REVENUE
    
    
    583,978
    
    
    
    667,379
    
    
    
    854,617OPERATING COSTS AND EXPENSES:Access and network services (excluding depreciation
and amortization)
    
    
    300,588
    
    
    
    347,532
    
    
    
    474,389Selling, general and administrative (excluding
depreciation and amortization)
    
    
    112,855
    
    
    
    119,890
    
    
    
    152,808Depreciation and amortization
    
    
    74,999
    
    
    
    84,015
    
    
    
    100,209TOTAL OPERATING EXPENSES
    
    
    488,442
    
    
    
    551,437
    
    
    
    727,406INCOME FROM OPERATIONS
    
    
    95,536
    
    
    
    115,942
    
    
    
    127,211OTHER INCOME (EXPENSE):Equity in earnings of ventures
    
    
    278
    
    
    
    460
    
    
    
    1,867Interest income
    
    
    1,131
    
    
    
    2,295
    
    
    
    1,211Interest expense
    
    
    (572
    )
    
    
    (618
    )
    
    
    (580
    )Foreign currency gain (loss)
    
    
    660
    
    
    
    (1,212
    )
    
    
    1,697TOTAL OTHER INCOME
    
    
    1,497
    
    
    
    925
    
    
    
    4,195Income before minority interest and income taxes
    
    
    97,033
    
    
    
    116,867
    
    
    
    131,406Minority interest
    
    
    1,506
    
    
    
    2,978
    
    
    
    4,808Income taxes
    
    
    30,744
    
    
    
    37,816
    
    
    
    40,417Income before cumulative effect of a change in
accounting principle
    
    
    64,783
    
    
    
    76,073
    
    
    
    86,181Cumulative effect of a change in accounting
principle,
net of tax of $52
    
    
    
    
    
    
    
    
    
    
    681NET INCOME
    
    $
    64,783
    
    
    $
    76,073
    
    
    $
    85,500Basic earnings per share of common stock:Income before cumulative effect of a change in
accounting principle
    
    $
    1.79
    
    
    $
    2.09
    
    
    $
    2.36Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    0.02Net income per share  basic
    
    $
    1.79
    
    
    $
    2.09
    
    
    $
    2.34Weighted average common shares
outstanding  basic
    
    
    36,226
    
    
    
    36,378
    
    
    
    36,591Diluted earnings per share of common stock:Income before cumulative effect of a change in
accounting principle
    
    $
    1.77
    
    
    $
    2.08
    
    
    $
    2.35Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    0.02Net income per share  diluted
    
    $
    1.77
    
    
    $
    2.08
    
    
    $
    2.33Weighted average common shares
outstanding  diluted
    
    
    36,553
    
    
    
    36,605
    
    
    
    36,717Cash dividends per share
    
    $
    0.80
    
    
    $
    0.80
    
    
    $
    0.60
  79




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
 Year Ended December 31,2004
    
    
    2005
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    64,783
    
    
    $
    76,073
    
    
    $
    85,500Adjustments to reconcile net income to Net Cash Provided by
Operating Activities:Depreciation
    
    
    56,818
    
    
    
    65,329
    
    
    
    79,219Amortization
    
    
    18,181
    
    
    
    18,686
    
    
    
    20,990Equity in earnings of ventures
    
    
    (278
    )
    
    
    (460
    )
    
    
    (1,867
    )Minority interest
    
    
    1,506
    
    
    
    2,978
    
    
    
    4,808Foreign currency (gain) loss
    
    
    (660
    )
    
    
    1,212
    
    
    
    (1,697
    )Deferred tax benefit
    
    
    (4,606
    )
    
    
    (3,815
    )
    
    
    (3,825
    )Bad debt expense
    
    
    10,065
    
    
    
    7,967
    
    
    
    4,128Stock appreciation rights compensation expense
    
    
    
    
    
    
    
    
    
    
    19,475Cumulative effect of a change in accounting principle, net of tax of $52
    
    
    
    
    
    
    
    
    
    
    681Other
    
    
    (41
    )
    
    
    1,223
    
    
    
    52Changes in assets and liabilities:Accounts receivable
    
    
    (22,964
    )
    
    
    (10,316
    )
    
    
    (55,960
    )Accounts payable and accrued expenses
    
    
    26,288
    
    
    
    4,295
    
    
    
    27,730VAT, net
    
    
    66
    
    
    
    (88
    )
    
    
    (13,800
    )Other assets and liabilities
    
    
    (3,974
    )
    
    
    11,222
    
    
    
    (4,665
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    145,184
    
    
    
    174,306
    
    
    
    160,769INVESTING ACTIVITIESPurchases of property and equipment and intangible assets
    
    
    (114,649
    )
    
    
    (118,170
    )
    
    
    (175,598
    )Acquisitions, net of cash acquired
    
    
    (15,522
    )
    
    
    (18,085
    )
    
    
    (26,778
    )Restricted cash
    
    
    (7
    )
    
    
    446
    
    
    
    333Other investing
    
    
    1,705
    
    
    
    2,743
    
    
    
    924NET CASH USED IN INVESTING ACTIVITIES
    
    
    (128,473
    )
    
    
    (133,066
    )
    
    
    (201,119
    )FINANCING ACTIVITIESRepayments of debt
    
    
    (950
    )
    
    
    (253
    )
    
    
    (643
    )Proceeds from debt
    
    
    
    
    
    
    
    
    
    
    11,621Contribution from minority partner
    
    
    
    
    
    
    3,840
    
    
    
    Net proceeds from exercise of employee stock options
    
    
    4,895
    
    
    
    1,435
    
    
    
    3,154Cash dividends paid
    
    
    (28,998
    )
    
    
    (29,119
    )
    
    
    (21,951
    )Other financing
    
    
    (3,385
    )
    
    
    (3,210
    )
    
    
    (1,954
    )NET CASH USED IN FINANCING ACTIVITES
    
    
    (28,438
    )
    
    
    (27,307
    )
    
    
    (9,773
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    246
    
    
    
    (456
    )
    
    
    1,360Net increase (decrease) in cash and cash equivalents
    
    
    (11,481
    )
    
    
    13,477
    
    
    
    (48,763
    )Cash and cash equivalents at beginning of year
    
    
    65,180
    
    
    
    53,699
    
    
    
    67,176CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    53,699
    
    
    $
    67,176
    
    
    $
    18,413
  80




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the Years Ended December 31, 2004, 2005, and 2006
(In Thousands)
 Retained
    
    
    AccumulatedAdditional
    
    
    Deferred
    
    
    Earnings
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Equity
    
    
    (Accumulated
    
    
    Comprehensive
    
    
    TotalShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Deficit)
    
    
    Income
    
    
    EquityBalance at December 31, 2003
    
    
    35,948
    
    
    $
    359
    
    
    $
    663,464
    
    
    $
    
    
    
    $
    (79,544
    )
    
    $
    
    
    
    $
    584,279Exercise of employee stock options
    
    
    374
    
    
    
    4
    
    
    
    4,775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,779Sale of 20% of Golden Telecom
(Ukraine) (see Note 17)
    
    
    
    
    
    
    
    
    
    
    1,538
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,538Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,998
    )
    
    
    
    
    
    
    (28,998
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,783
    
    
    
    
    
    
    
    64,783Balance at December 31, 2004
    
    
    36,322
    
    
    $
    363
    
    
    $
    669,777
    
    
    $
    
    
    
    $
    (43,759
    )
    
    $
    
    
    
    $
    626,381Issuance of restricted shares
    
    
    27
    
    
    
    1
    
    
    
    771
    
    
    
    (772
    )
    
    
    
    
    
    
    
    
    
    
    Compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    317Exercise of employee stock options
    
    
    109
    
    
    
    1
    
    
    
    1,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,451Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,119
    )
    
    
    
    
    
    
    (29,119
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,073
    
    
    
    
    
    
    
    76,073Balance at December 31, 2005
    
    
    36,458
    
    
    $
    365
    
    
    $
    671,998
    
    
    $
    (455
    )
    
    $
    3,195
    
    
    $
    
    
    
    $
    675,103Adoption of SFAS 123R 
adjustment to remove unearned
compensation
    
    
    
    
    
    
    
    
    
    
    (455
    )
    
    
    455
    
    
    
    
    
    
    
    
    
    
    
    Cancellation of restricted shares
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of
restricted shares
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation expense
    
    
    
    
    
    
    
    
    
    
    298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    298Exercise of employee stock options
    
    
    215
    
    
    
    2
    
    
    
    3,152
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,154Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,951
    )
    
    
    
    
    
    
    (21,951
    )Comprehensive income:Foreign currency translation
adjustment, net of tax of $2,181
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,072
    
    
    
    75,072Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,500
    
    
    
    
    
    
    
    85,500Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160,572Balance at December 31, 2006
    
    
    36,673
    
    
    $
    367
    
    
    $
    674,993
    
    
    $
    
    
    
    $
    66,744
    
    
    $
    75,072
    
    
    $
    817,176
  81




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1: Nature of Business Operations
  Note 2: Summary of Significant Accounting Policies and Recent Accounting Pronouncements
 Principles of Consolidation
   Sale of Subsidiary Stock
  Foreign Currency Translation
 Foreign Currency Translation .
 82




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Comprehensive Income
 Reporting Comprehensive Income
  Year Ended December 31,2004
    
    
    2005
    
    
    2006(in thousands)Net income, as reported
    
    $
    64,783
    
    
    $
    76,073
    
    
    $
    85,500Foreign currency translation adjustment, net of tax of $2,181
    
    
    
    
    
    
    
    
    
    
    75,072Comprehensive income
    
    $
    64,783
    
    
    $
    76,073
    
    
    $
    160,572
 Cash and Cash Equivalents and Restricted Cash
  Accounts Receivable
  Inventories
  83




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Property and Equipment
  Goodwill and Intangible Assets
 Goodwill and Other Intangible Assets Intangible Assets Goodwill and Other Intangible Assets
 Goodwill Impairment Assessment
 Goodwill and Other Intangible Assets
 Long-Lived Assets Impairment
  Income Taxes
 Accounting for Income Taxes.
 84




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Revenue Recognition
   Advertising
  Government Pension Funds
  Off Balance Sheet Risk and Concentration of Credit Risk
  Stock-Based Compensation
 Accounting for
Stock-Based Compensation, Accounting for Stock Issued to Employees.
 85




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2004
    
    
    2005(in thousands, exceptper share data)Net income, as reported
    
    $
    64,783
    
    
    $
    76,073Deduct: total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects
    
    
    1,922
    
    
    
    620Pro forma net income
    
    $
    62,861
    
    
    $
    75,453Net income per share:Basic  as reported
    
    $
    1.79
    
    
    $
    2.09Basic  pro forma
    
    
    1.74
    
    
    
    2.07Diluted  as reported
    
    
    1.77
    
    
    
    2.08Diluted  pro forma
    
    
    1.72
    
    
    
    2.06
 Share Based Payment Statement of Cash Flows
   86




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Consolidation of Variable Interest Entities
 Consolidation of Variable
Interest Entities
 Fair Value of Financial Instruments
  Exchanges of Nonmonetary Assets
 Exchanges of Nonmonetary Assets
 Accounting Changes and Error Corrections
 Accounting Changes and Error Corrections Accounting Changes Reporting Changes in Interim Financial Statements
 Changes in Accounting Estimates
   87




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Use of Estimates in Preparation of Financial Statements
  Comparative Figures
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes
 Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Fair Value Measurements
 Fair Value Measurements
 Consideration of Effects of Prior Year Misstatements
 Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements.
 Income Statement Presentation of Taxes Collected from Customers and Remitted to Government
Authorities
 How Taxes Collected from Customers and Remitted to Governmental Authorities
Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).
 88




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 3: Net Income Per Share
   Year Ended December 31,2004
    
    
    2005
    
    
    2006(in thousands, except per share data)Net Income
    
    $
    64,783
    
    
    $
    76,073
    
    
    $
    85,500Weighted average shares outstanding of:Common stock
    
    
    36,226
    
    
    
    36,378
    
    
    
    36,591Dilutive effect of:Employee stock options
    
    
    327
    
    
    
    227
    
    
    
    126Common stock and common stock equivalents
    
    
    36,553
    
    
    
    36,605
    
    
    
    36,717Net Income per share:Basic
    
    $
    1.79
    
    
    $
    2.09
    
    
    $
    2.34Diluted
    
    $
    1.77
    
    
    $
    2.08
    
    
    $
    2.33
 Note 4: Goodwill and Intangible Assets
  As of December 31, 2005
    
    
    As of December 31, 2006(in thousands)Weighted Average
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    AccumulatedAmortization Lives
    
    
    Cost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationAmortized intangible assets:Telecommunications service contracts
    
    10 years
    
    $
    99,366
    
    
    $
    (32,009
    )
    
    $
    119,433
    
    
    $
    (49,450
    )Contract-based customer relationships
    
    5 years
    
    
    36,849
    
    
    
    (18,241
    )
    
    
    42,104
    
    
    
    (28,578
    )Licenses
    
    10 years
    
    
    7,176
    
    
    
    (3,182
    )
    
    
    26,948
    
    
    
    (4,295
    )Other intangible assets
    
    6 years
    
    
    11,137
    
    
    
    (7,216
    )
    
    
    18,374
    
    
    
    (7,991
    )Total
    
    
    
    
    
    $
    154,528
    
    
    $
    (60,648
    )
    
    $
    206,859
    
    
    $
    (90,314
    )
  Business&
    
    
    Carrier &
    
    
    ConsumerCorporate
    
    
    Operator
    
    
    InternetSegment
    
    
    Segment
    
    
    Segment
    
    
    Total(in thousands)Balance as of December 31, 2004
    
    $
    86,824
    
    
    $
    59,430
    
    
    
    
    
    
    $
    146,254Goodwill related to acquisitions
    
    
    1,563
    
    
    
    302
    
    
    
    1,130
    
    
    
    2,995Balance as of December 31, 2005
    
    $
    88,387
    
    
    $
    59,732
    
    
    $
    1,130
    
    
    $
    149,249Goodwill related to acquisitions
    
    
    6,215
    
    
    
    420
    
    
    
    1,456
    
    
    
    8,091Other
    
    
    (133
    )
    
    
    (35
    )
    
    
    (717
    )
    
    
    (885
    )Foreign currency translation adjustment (see Note 2)
    
    
    12,983
    
    
    
    11,011
    
    
    
    90
    
    
    
    24,084Balance as of December 31, 2006
    
    $
    107,452
    
    
    $
    71,128
    
    
    $
    1,959
    
    
    $
    180,539
 89




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 5: Business Combinations
 Acquisitions in 2004
   Acquisitions in 2005
    90




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Acquisitions in 2006
    Business
Combinations Goodwill and Other Intangible Assets
  91




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Business Combinations Goodwill and Other Intangible Assets
  Business Combinations Goodwill and Other Intangible Assets
   Business
Combinations Goodwill and Other Intangible Assets
  Note 6: Investments in and Advances to Ventures
  92




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  December 31,2005
    
    
    2006(in thousands)Equity in net assets acquired
    
    $
    11,565
    
    
    $
    13,448Goodwill as part of investment
    
    
    1,313
    
    
    
    1,313Difference between fair value and historical value of
assets acquired
    
    
    (1,095
    )
    
    
    (1,355
    )Cash advances and other
    
    
    (894
    )
    
    
    (1,520
    )Total investments in and advances to ventures
    
    $
    10,889
    
    
    $
    11,886
   Note 7: Supplemental Balance Sheet Information
 December 31,2005
    
    
    2006(in thousands)Other current assets consist of:Inventory
    
    $
    5,310
    
    
    $
    7,682Notes receivable
    
    
    1,494
    
    
    
    379Interest receivable
    
    
    4
    
    
    
    120Due from related parties
    
    
    703
    
    
    
    1,227Taxes receivable
    
    
    549
    
    
    
    6,466Other current assets
    
    
    4,949
    
    
    
    5,444Total other current assets
    
    $
    13,009
    
    
    $
    21,318Other non-current assets consist of:Notes receivable
    
    $
    
    
    
    $
    2,500Investments in and advances to ventures
    
    
    10,889
    
    
    
    11,886Deferred tax asset
    
    
    2
    
    
    
    1,139Other non-current assets
    
    
    8,761
    
    
    
    10,602Total other non- current assets
    
    $
    19,652
    
    
    $
    26,127Accounts payable and accrued expenses consists of:Accounts payable
    
    $
    60,043
    
    
    $
    78,799Accrued compensation
    
    
    11,322
    
    
    
    33,367Accrued other taxes
    
    
    3,132
    
    
    
    3,717Accrued access and network services
    
    
    12,196
    
    
    
    27,734Other accrued expenses
    
    
    2,711
    
    
    
    2,441Total accounts payable and accrued expenses
    
    $
    89,404
    
    
    $
    146,058
 Note 8: Debt Obligations and Capital Leases
   93




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
      Lease payments(in thousands)2007
    
    $
    8762008
    
    
    7422009
    
    
    6312010
    
    
    3342,583Less: amount representing
interest
    
    
    239Total principal payments
    
    $
    2,344
 Note 9: Shareholders Equity
 Common Stock
    94




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Preferred Stock
  Deferred Equity Compensation
  Dividends
   Note 10: Stock Option and Stock Appreciation Rights Plans
   Year Ended December 31,2004
    
    2005Risk free interest rate
    
    
    4.39
    %
    
    
    3.86
    %Dividend yield
    
    
    3.0
    %
    
    
    3.0
    %Expected life (years)
    
    
    3.0
    
    
    
    3.0Volatility
    
    
    95
    %
    
    
    88
    %
   Year Ended December 31,2004
    
    2005
    
    2006Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Price
    
    Shares
    
    Price
    
    Shares
    
    PriceOutstanding at beginning of
year
    
    
    904,272
    
    
    $
    13.48
    
    
    
    517,013
    
    
    $
    14.18
    
    
    
    373,012
    
    
    $
    14.31Options granted
    
    
    5,000
    
    
    
    26.61
    
    
    
    2,500
    
    
    
    26.32
    
    
    
    
    
    
    
    Options exercised
    
    
    (374,396
    )
    
    
    12.76
    
    
    
    (109,000
    )
    
    
    13.31
    
    
    
    (215,097
    )
    
    
    14.66Options expired
    
    
    
    
    
    
    
    
    
    
    (12,500
    )
    
    
    20.88
    
    
    
    
    
    
    
    Options forfeited
    
    
    (17,863
    )
    
    
    12.00
    
    
    
    (25,001
    )
    
    
    14.00
    
    
    
    
    
    
    
    Outstanding at end of
year
    
    
    517,013
    
    
    
    14.18
    
    
    
    373,012
    
    
    
    14.31
    
    
    
    157,915
    
    
    
    13.82Options exercisable at end
of year
    
    
    448,818
    
    
    $
    14.07
    
    
    
    369,817
    
    
    $
    14.22
    
    
    
    157,915
    
    
    $
    13.82
 95




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Options Outstanding and ExercisableWeightedAverageNumber
    
    
    RemainingOutstanding
    
    
    Contractual
    
    
    IntrinsicExercise Prices
    
    
    and
    
    
    Life
    
    
    Valueat December 31, 2006:
    
    
    Exercisable
    
    
    (In Years)
    
    
    (In thousands)$
    12.00
    
    
    
    103,997
    
    
    
    4.5
    
    
    $
    3,62315.63
    
    
    
    38,918
    
    
    
    2.8
    
    
    
    1,21519.45
    
    
    
    10,000
    
    
    
    1.4
    
    
    
    27426.32
    
    
    
    2,500
    
    
    
    3.4
    
    
    
    5126.61
    
    
    
    2,500
    
    
    
    2.4
    
    
    
    51157,915
    
    
    
    
    
    
    $
    5,214
    96




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Year EndedDecember 31, 2006Weighted-average volatility
    
    
    42.5
    %Expected dividend yield
    
    
    1.7
    %Expected term
    
    0.12  4.75 yearsRisk-free rate
    
    
    4.7
    %
  WeightedAverageExercise
    
    AggregateSARs
    
    Price
    
    Intrinsic Value(in thousands)Outstanding at January 1,
2006
    
    
    1,251,800
    
    
    $
    29.19SARs granted
    
    
    177,000
    
    
    
    27.94SARs exercised
    
    
    (20,200
    )
    
    
    28.15SARs expired
    
    
    
    
    
    
    SARs forfeited
    
    
    (114,800
    )
    
    
    28.91Outstanding at December 31,
2006
    
    
    1,293,800
    
    
    
    29.05
    
    
    $
    23,007Exercisable at December 31,
2006
    
    
    233,217
    
    
    $
    28.63
    
    
    $
    4,247
  Note 11: Income Taxes
  Year Ended December 31,2004
    
    
    2005
    
    
    2006(in thousands)Pretax
income (loss):Domestic
    
    $
    (4,853
    )
    
    $
    (8,405
    )
    
    $
    (11,176
    )Foreign
    
    
    101,886
    
    
    
    125,272
    
    
    
    142,582$
    97,033
    
    
    $
    116,867
    
    
    $
    131,406
  Year Ended December 31,2004
    
    
    2005
    
    
    2006(in thousands)Domestic  current
    
    $
    
    
    
    $
    
    
    
    $
    Domestic  deferred
    
    
    (373
    )
    
    
    2,234
    
    
    
    Foreign  current
    
    
    35,350
    
    
    
    41,630
    
    
    
    44,242Foreign  deferred
    
    
    (4,233
    )
    
    
    (6,048
    )
    
    
    (3,825
    )$
    30,744
    
    
    $
    37,816
    
    
    $
    40,417
  97




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Year Ended December 31,2004
    
    2005
    
    2006Tax expense at US statutory rates
    
    
    (35.0
    )%
    
    
    (35.0
    )%
    
    
    (35.0
    )%Non-deductible expenses
    
    
    (7.3
    )
    
    
    (4.8
    )
    
    
    (4.7
    )Foreign exchange differences
    
    
    0.2
    
    
    
    (0.3
    )
    
    
    0.2Different foreign tax rates
    
    
    11.4
    
    
    
    11.9
    
    
    
    11.9Change in valuation allowance
    
    
    0.0
    
    
    
    (4.2
    )
    
    
    (2.4
    )Other permanent differences
    
    
    (1.0
    )
    
    
    0.0
    
    
    
    (0.8
    )Tax expense
    
    
    (31.7
    )%
    
    
    (32.4
    )%
    
    
    (30.8
    )%
  December 31,2005
    
    
    2006(in thousands)Deferred Tax Assets:Net operating loss carry-forwards
    
    $
    5,581
    
    
    $
    6,242Accrued expenses
    
    
    3,314
    
    
    
    10,034Deferred revenue
    
    
    11,056
    
    
    
    13,940Intangible assets
    
    
    2,595
    
    
    
    2,359Fixed assets
    
    
    761
    
    
    
    294Other deferred tax assets
    
    
    1,789
    
    
    
    3,046Valuation allowance
    
    
    (8,441
    )
    
    
    (11,550
    )Total deferred tax asset
    
    $
    16,655
    
    
    $
    24,365Deferred Tax Liabilities:Accrued revenue
    
    $
    
    
    
    $
    693Deferred expenses
    
    
    2,812
    
    
    
    3,129Intangible assets
    
    
    21,337
    
    
    
    26,606Fixed assets
    
    
    5,500
    
    
    
    9,172Other deferred tax liabilities
    
    
    299
    
    
    
    1,817Total deferred tax liability
    
    $
    29,948
    
    
    $
    41,417Net deferred tax liability
    
    $
    (13,293
    )
    
    $
    (17,052
    )
  December 31,2005
    
    
    2006(in thousands)Deferred Tax Assets:US tax component
    
    $
    
    
    
    $
    Foreign tax component
    
    
    16,655
    
    
    
    24,365Total deferred tax asset
    
    $
    16,655
    
    
    $
    24,365Deferred Tax Liability:US tax component
    
    $
    
    
    
    $
    Foreign tax component
    
    
    29,948
    
    
    
    41,417Total deferred tax liability
    
    $
    29,948
    
    
    $
    41,417Net deferred tax liability
    
    $
    (13,293
    )
    
    $
    (17,052
    )
 98




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 12: Commitments and Contingencies
 Leases
   Other Commitments and Contingencies
   Tax Matters
     99




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Russian Environment and Current Economic Situation
     Other Matters
    Note 13: Related Party Transactions
  100




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2004
    
    
    2005
    
    
    2006(in thousands)Revenue from equity investees
    
    $
    116
    
    
    $
    363
    
    
    $
    779Revenue from Rostelecom
    
    
    404
    
    
    
    646
    
    
    
    1,953Revenue from Telenor
    
    
    139
    
    
    
    470
    
    
    
    593Revenue from Alfa
    
    
    1,798
    
    
    
    3,158
    
    
    
    4,552$
    2,457
    
    
    $
    4,637
    
    
    $
    7,877Cost of revenue from equity investees
    
    
    4,798
    
    
    
    3,038
    
    
    
    7,867Cost of revenue from Rostelecom
    
    
    25,809
    
    
    
    23,979
    
    
    
    33,721Cost of revenue from Telenor
    
    
    332
    
    
    
    605
    
    
    
    367Cost of revenue from Alfa
    
    
    56
    
    
    
    
    
    
    
    $
    30,995
    
    
    $
    27,622
    
    
    $
    41,955
  2005
    
    
    2006(in thousands)Accounts receivable from Rostelecom
    
    $
    35
    
    
    $
    440Accounts receivable from Telenor
    
    
    195
    
    
    
    107Accounts receivable from Alfa
    
    
    473
    
    
    
    681$
    703
    
    
    $
    1,228Accounts payable from Rostelecom
    
    
    2,402
    
    
    
    4,441Accounts payable from Telenor
    
    
    68
    
    
    
    57Accounts payable from Alfa
    
    
    
    
    
    
    7$
    2,470
    
    
    $
    4,505
       101




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 14: Segment Information
 Line Of Business Data
  Adjustments to ReconcileBusiness Segment toConsolidated ResultsBusiness
    
    Carrier
    
    
    
    
    
    
    
    
    
    
    
    
    
    Business
    
    
    
    
    
    Equityand
    
    and
    
    Consumer
    
    Mobile
    
    Corporate &
    
    Segment
    
    Consolidated
    
    Method
    
    AffiliateCorporate
    
    Operator
    
    Internet
    
    Services
    
    Eliminations
    
    Total
    
    Results
    
    Ventures
    
    Adjustments(in thousands)Year Ended
December 31, 2004Revenue from external
customers
    
    $
    324,814
    
    
    $
    198,027
    
    
    $
    45,515
    
    
    $
    15,808
    
    
    $
    
    
    
    $
    584,164
    
    
    $
    583,978
    
    
    $
    (4,710
    )
    
    $
    4,524Intersegment revenue
    
    
    
    
    
    
    1,016
    
    
    
    
    
    
    
    
    
    
    
    (1,016
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    72,345
    
    
    
    28,637
    
    
    
    2,159
    
    
    
    4,729
    
    
    
    (11,756
    )
    
    
    96,114
    
    
    
    95,536
    
    
    
    (578
    )
    
    
    Identifiable assets
    
    
    435,276
    
    
    
    261,424
    
    
    
    57,732
    
    
    
    5,693
    
    
    
    49,562
    
    
    
    809,687
    
    
    
    805,768
    
    
    
    (3,919
    )
    
    
    Capital expenditures
    
    
    80,107
    
    
    
    33,223
    
    
    
    4,920
    
    
    
    1,025
    
    
    
    178
    
    
    
    119,453
    
    
    
    118,101
    
    
    
    (1,352
    )
    
    
    
 Adjustments to ReconcileBusiness Segment toConsolidated ResultsBusiness
    
    Carrier
    
    
    
    
    
    
    
    
    
    
    
    
    
    Business
    
    
    
    
    
    Equityand
    
    and
    
    Consumer
    
    Mobile
    
    Corporate &
    
    Segment
    
    Consolidated
    
    Method
    
    AffiliateCorporate
    
    Operator
    
    Internet
    
    Services
    
    Eliminations
    
    Total
    
    Results
    
    Ventures
    
    Adjustments(in thousands)Year Ended
December 31, 2005Revenue from external
customers
    
    $
    387,532
    
    
    $
    222,904
    
    
    $
    44,484
    
    
    $
    14,103
    
    
    $
    
    
    
    $
    669,023
    
    
    $
    667,379
    
    
    $
    (4,449
    )
    
    $
    2,805Intersegment revenue
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    102,415
    
    
    
    27,894
    
    
    
    (1,322
    )
    
    
    3,523
    
    
    
    (16,268
    )
    
    
    116,242
    
    
    
    115,942
    
    
    
    (300
    )
    
    
    Identifiable assets
    
    
    494,266
    
    
    
    323,278
    
    
    
    67,511
    
    
    
    2,855
    
    
    
    21,759
    
    
    
    909,669
    
    
    
    882,211
    
    
    
    (27,458
    )
    
    
    Capital expenditures
    
    
    89,386
    
    
    
    32,879
    
    
    
    8,360
    
    
    
    367
    
    
    
    132
    
    
    
    131,124
    
    
    
    130,775
    
    
    
    (349
    )
    
    
    
 Adjustments to ReconcileBusiness Segment toConsolidated ResultsBusiness
    
    Carrier
    
    
    
    
    
    
    
    
    
    
    
    
    
    Business
    
    
    
    
    
    Equityand
    
    and
    
    Consumer
    
    Mobile
    
    Corporate &
    
    Segment
    
    Consolidated
    
    Method
    
    AffiliateCorporate
    
    Operator
    
    Internet
    
    Services
    
    Eliminations
    
    Total
    
    Results
    
    Ventures
    
    Adjustments(in thousands)Year Ended
December 31, 2006Revenue from external
customers
    
    $
    487,970
    
    
    $
    318,698
    
    
    $
    48,744
    
    
    $
    9,599
    
    
    $
    
    
    
    $
    865,011
    
    
    $
    854,617
    
    
    $
    (18,074
    )
    
    $
    7,680Intersegment revenue
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    125,543
    
    
    
    31,574
    
    
    
    (7,999
    )
    
    
    722
    
    
    
    (18,514
    )
    
    
    131,326
    
    
    
    127,211
    
    
    
    (4,115
    )
    
    
    Identifiable assets
    
    
    611,275
    
    
    
    428,684
    
    
    
    107,966
    
    
    
    14,543
    
    
    
    (20,677
    )
    
    
    1,141,791
    
    
    
    1,107,190
    
    
    
    (34,601
    )
    
    
    Capital expenditures
    
    
    105,291
    
    
    
    45,542
    
    
    
    21,626
    
    
    
    13,069
    
    
    
    95
    
    
    
    185,623
    
    
    
    179,772
    
    
    
    (5,851
    )
    
    
    
 102




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Geographic Data
   Corporate,OtherCountries &
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Year ended December 31, 2004Revenue
    
    $
    522,018
    
    
    $
    64,455
    
    
    $
    (2,495
    )
    
    $
    583,978Long-lived assets
    
    
    563,856
    
    
    
    27,995
    
    
    
    11,116
    
    
    
    602,967Year ended December 31, 2005Revenue
    
    $
    593,640
    
    
    $
    73,816
    
    
    $
    (77
    )
    
    $
    667,379Long-lived assets
    
    
    611,788
    
    
    
    44,801
    
    
    
    14,092
    
    
    
    670,681Year ended December 31, 2006Revenue
    
    $
    766,169
    
    
    $
    81,819
    
    
    $
    6,629
    
    
    $
    854,617Long-lived assets
    
    
    780,737
    
    
    
    78,381
    
    
    
    16,434
    
    
    
    875,552
 Note 15: Supplemental Cash Flow Information
  Year Ended December 31,(in thousands)2004
    
    2005
    
    2006Amounts payable in connection with
business acquisitions
    
    $
    400
    
    
    $
    885
    
    
    $
    378Capitalized leased assets
    
    
    
    
    
    
    3,580
    
    
    
    
 Note 16: Long Term Incentive Bonus Program
  Note 17: Sale of Minority Interest in Subsidiary
  103




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GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Note 18: Quarterly Financial Data (Unaudited)
  For the Three Months EndedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,2005
    
    2005
    
    2005
    
    2005(in thousands, except per share data)Revenues
    
    $
    156,465
    
    
    $
    165,509
    
    
    $
    169,930
    
    
    $
    175,475Access and network services (excluding
depreciation and amortization)
    
    
    79,997
    
    
    
    86,191
    
    
    
    88,345
    
    
    
    92,999Gross Margin
    
    
    76,468
    
    
    
    79,318
    
    
    
    81,585
    
    
    
    82,476Selling, general and administrative
(excluding
depreciation and amortization)
    
    
    27,586
    
    
    
    28,828
    
    
    
    30,967
    
    
    
    32,509Net income
    
    
    20,027
    
    
    
    19,767
    
    
    
    18,395
    
    
    
    17,884Net income per share(1)- basic
    
    
    0.55
    
    
    
    0.54
    
    
    
    0.51
    
    
    
    0.49Net income per share(1)- diluted
    
    
    0.55
    
    
    
    0.54
    
    
    
    0.50
    
    
    
    0.49
 For the Three Months EndedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,2006
    
    2006
    
    2006
    
    2006 (2)(3)(in thousands, except per share data)Revenues
    
    $
    178,140
    
    
    $
    196,968
    
    
    $
    228,717
    
    
    $
    250,792Access and network services (excluding
depreciation and amortization)
    
    
    93,393
    
    
    
    105,608
    
    
    
    128,153
    
    
    
    147,235Gross Margin
    
    
    84,747
    
    
    
    91,360
    
    
    
    100,564
    
    
    
    103,557Selling, general and administrative
(excluding
depreciation and amortization)
    
    
    33,881
    
    
    
    33,569
    
    
    
    37,505
    
    
    
    47,853
    (4)Net income
    
    
    18,785
    
    
    
    22,645
    
    
    
    24,229
    
    
    
    19,841Net income per share(1)-basic
    
    
    0.52
    
    
    
    0.62
    
    
    
    0.66
    
    
    
    0.54Net income per share(1)- diluted
    
    
    0.51
    
    
    
    0.62
    
    
    
    0.66
    
    
    
    0.54
 
 (1)
    
    The sum of the earnings per share for the four quarters will generally not equal earnings
per share for the total year due to changes in the average number of common shares
outstanding.(2)
    
    The operating results for the fourth quarter of 2006 include
the impact of a $3.1 million
change in estimate with respect to the Companys allowance for doubtful accounts.(3)
    
    The operating results for the fourth quarter of 2006 include
the impact of $2.6 million due
to the reversal of liabilities to a former shareholder because of the expiration of the
statute of limitations.(4)
    
    Includes SARs expense of $13.8 million. 104




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 19: Subsequent Events
     105




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##### Table of Contents



ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
  
 ITEM 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
   Changes in Internal Control over Financial Reporting
  106




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
         
 107




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##### Table of Contents



ITEM 9B. Other Information
 108




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##### Table of Contents



PART III
 
 ITEM 10. Directors and Executive Officers of the Registrant
  http://www.goldentelecom.com
 
 ITEM 11. Executive Compensation
  
 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
   Equity Compensation Plan Information
  (a)
    
    (b)
    
    (c)Number of securitiesremaining available forNumber of securities to
    
    Weighted-average
    
    future issuance underbe issued upon exercise
    
    exercise price of
    
    equity compensationof outstanding options,
    
    outstanding options,
    
    plans (excluding securitiesPlan category
    
    warrants and rights
    
    warrants and rights
    
    reflected in column (a)).Equity compensation plan
approved
by security
holders
    
    
    357,915
    
    
    $
    22.19
    
    
    
    853,271Total
    
    
    357,915
    
    
    
    
    
    
    
    853,271
  
 ITEM 13. Certain Relationships and Related Transactions
  
 ITEM 14 Principal Accountant Fees and Services
  109




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##### Table of Contents



PART IV
 
 ITEM 15. Exhibits and Financial Statement Schedules
  1.
    
    Financial Statements
  §
    
    Report of Independent Registered Public Accounting Firm§
    
    Consolidated Balance Sheets as of December 31, 2005 and 2006§
    
    Consolidated Statements of Operations for the years ended December 31, 2004, 2005 and 2006§
    
    Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2005 and 2006§
    
    Consolidated Statements of Changes in Shareholders Equity for the years ended December 31, 2004, 2005 and 2006§
    
    Notes to Consolidated Financial Statements2.
    
    Consolidated Financial Statement Schedules
    ExhibitNumber
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of Golden Telecom, Inc. (Incorporated herein by
reference to Exhibit 3.1 to the Companys registration statement on Form S-1 dated July 14, 1999 and
amendments (Commission File No. 333-82791)).3.2
    
    Amended and Restated By-laws of Golden Telecom, Inc. (Incorporated by reference to Exhibit 3.1 to the
Companys current report on Form 8-K dated December 12, 2005).4.1
    
    Specimen certificate representing shares of Common Stock. (Incorporated by reference to Exhibit 4.1 to
the Companys registration statement on Form S-1 dated July 14, 1999 (Commission File No. 333-82791)).10.1
    
    Shareholders Agreement among Golden Telecom, Inc., Alfa Telecom Limited, Nye Telenor East Invest AS,
OAO Rostelecom, Capital International Global Emerging Markets Private Equity Fund, L.P., Cavendish
Nominees Limited and First NIS Regional Fund SICAV. (Incorporated by reference to Exhibit 99.7 to the
Companys current report on From 8-K dated August 19, 2003).10.2
    
    Registration Rights Agreement among Golden Telecom, Inc., Alfa Telecom Limited, Nye Telenor East
Invest AS, OAO Rostelecom, Capital International Global Emerging Markets Private Equity Fund, L.P.,
Cavendish Nominees Limited and First NIS Regional Fund SICAV. (Incorporated by reference to Exhibit
99.5 to the Companys current report on From 8-K dated August 19, 2003).10.3
    
    Golden Telecom, Inc. 1999 Equity Participation Plan. (Incorporated by reference to the Companys
definitive proxy statement on Form DEF-14A dated April 25, 2000).10.4
    
    Amendment to the Golden Telecom, Inc. 1999 Equity Participation Plan. (Incorporated by reference to
the Companys definitive proxy statement on Form DEF-14A dated May 23, 2001).
 110




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.5
    
    Form of Stock Option Award Agreement. (Incorporated by reference to Exhibit 10.8 to the Companys
annual report on Form 10-K for the year ended December 31, 2004).10.6(a)
    
    Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan. (Incorporated by reference to Exhibit 10.1
to the Companys current report on Form 8-K dated November 22, 2005).10.6(b)
    
    Amendment to the Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan. (Incorporated by reference
to Exhibit 10.1 to the Companys current report on Form 8-K dated December 12, 2005).10.7(a)
    
    Form of Award Agreement under the Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan.
(Incorporated by reference to Exhibit 10.2 to the Companys current report on Form 8-K dated November
22, 2005).10.7(b)
    
    Amended Form of Award Agreement under the Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan.
(Incorporated by reference to Exhibit 10.2 to the Companys current report on Form 8-K dated December
12, 2005).10.8
    
    EDN Sovintel 2005 Stock Appreciation Rights Bonus Plan. (Incorporated by reference to Exhibit 10.3 to
the Companys current report on Form 8-K dated November 22, 2005).10.9
    
    Form of Award Agreement under the EDN Sovintel 2005 Stock Appreciation Bonus Rights Plan.
(Incorporated by reference to Exhibit 10.4 to the Companys current report on Form 8-K dated November
22, 2005).10.10
    
    Employment Agreement between Golden Telecom, Inc. and Jean-Pierre Vandromme, Chief Executive Officer.
(Incorporated by reference to Exhibit 99.2 to the Companys current report on Form 8-K dated July 18,
2005).10.11
    
    Employment Agreement between Golden TeleServices, Inc. and Alexander Vinogradov, President.
(Incorporated by reference to Exhibit 10.5 to the Companys annual report on Form 10-K for the year
ended December 31, 2004).10.12
    
    Amendment No. 1 to Employment Agreement between Golden TeleServices, Inc. and Alexander Vinogradov,
President. (Incorporated by reference to Exhibit 10.1 to the Companys current report on Form 8-K
dated October 24, 2005).10.13
    
    Employment Agreement between Golden Telecom, Inc. and Boris Svetlichny, Senior Vice-President, Chief
Financial Officer and Treasurer. (Incorporated by reference to Exhibit 10.1 to the Companys current
report on Form 8-K dated January 26, 2006).10.14*
    
    Employment agreement between Golden
Telecom, Inc. and Ilya Smirnov, Vice President, Acting General
Counsel and Corporate Secretary.10.15*
    
    Schedule of Compensation Arrangements with Directors.10.16
    
    Facility Agreement, dated January 25, 2007, entered into by Golden Telecom, inc., GTS Finance, Inc.,
and EDN Sovintel LLC with Lenders, Citibank N.A. London Branch and ING Bank N.W. as mandated lead
arrangers and Citibank International plc as agent. (Incorporated by reference to Exhibit 10.1 to the
Companys current report on Form 8-K dated January 25, 2007).10.17
    
    Stock Purchase Agreement, dated as of February 22, 2007, by and among EDN Sovintel LLC, Golden
Telecom, Inc., Inure Enterprises Ltd., and Rambert Management Limited. (Incorporated by reference to
Exhibit 10.1 to the Companys current report on Form 8-K dated February 22, 2007).10.18
    
    Registration Rights Agreement, dated as of February 22, 2007, by and between Golden Telecom, Inc. and
Inure Enterprises Ltd. (Incorporated by reference to Exhibit 10.2 to the Companys current report on
Form 8-K dated February 22, 2007).10.19
    
    Shareholders Agreement, dated as of February 22, 2007, by and among EDN Sovintel LLC, SFMT-CIS, Inc.,
Inure Enterprises Ltd., and ZAO Cortec. (Incorporated by reference to Exhibit 10.3 to the Companys
current report on Form 8-K dated February 22, 2007).10.20
    
    Share Purchase Agreement, dated
December 15, 2006, by and between SFMT-CIS, Inc. and Belmark
Enterprises, Inc. (Incorporated by reference to Exhibit 10.2 to the
Companys current report on Form 8-K dated December 15, 2006).

10.21
    
    Share Option Agreement, dated
December 15, 2006, by and between SFMT-CIS, Inc., Navic Consulting
Ltd., and Belmark Enterprises, Inc. (Incorporated by reference to
Exhibit 10.3 to the Companys current report on Form 8-K dated
December 15, 2006).

10.22
    
    Loan Agreement, dated
December 15, 2006, by and between GTS Finance, Inc. and Navic Consulting
Ltd. (Incorporated by reference to
Exhibit 10.4 to the Companys current report on Form 8-K dated
December 15, 2006).

10.23
    
    Pledge and Security Agreement, dated
December 15, 2006, by and between GTS Finance, Inc., Fortland Limited, and Navic Consulting
Ltd. (Incorporated by reference to
Exhibit 10.5 to the Companys current report on Form 8-K dated
December 15, 2006).

21.1*
    
    List of subsidiaries of Golden Telecom, Inc.23.1*
    
    Consent of Ernst & Young LLC, Independent Registered Public Accounting Firm.24.1*
    
    Powers of Attorney (included on signature page).31.1*
    
    Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 111




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit32.1*
    
    Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith. 112




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##### Table of Contents



SIGNATURES
  GOLDEN TELECOM, INC.(Registrant)By:
    
    /s/ BORIS SVETLICHNYName:
    
    Boris SvetlichnyTitle:
    
    Senior Vice President, Chief Financial Officer and Treasurer(Principal Financial Officer)By:
    
    /s/ MICHAEL D. WILSONName:
    
    Michael D. WilsonTitle:
    
    Vice President and Corporate Controller(Principal Accounting Officer)
   Signature
    
    Title
    
    Date/s/ JEAN-PIERRE VANDROMME

Jean-Pierre Vandromme
    
    Chief Executive Officer and Director
(Principal Executive Officer)
    
    March 16, 2007/s/ PETER AVEN

Peter Aven
    
    Chairman of the Board
of Directors
    
    March 16, 2007/s/ VLADIMIR BULGAK

Vladimir Bulgak
    
    Director
    
    March 16, 2007/s/ PATRICK GALLAGHER

Patrick Gallagher
    
    Director
    
    March 16, 2007/s/ DAVID HERMAN

David Herman
    
    Director
    
    March 16, 2007/s/ KJELL JOHNSEN

Kjell Johnsen
    
    Director
    
    March 16, 2007/s/ ALEXEY KHUDYAKOV

Alexey Khudyakov
    
    Director
    
    March 16, 2007/s/ OLEG MALIS

Oleg Malis
    
    Director
    
    March 16, 2007/s/ RONNY NAEVDAL

Ronny Naevdal
    
    Director
    
    March 16, 2007/s/ DAVID SMYTH
    
    Director
    
    March 16, 2007David Smyth/s/ BORIS SVETLICHNY

Boris Svetlichny
    
    Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
    
    March 16, 2007/s/ MICHAEL D. WILSON

Michael D. Wilson
    
    Vice President and
Corporate Controller
(Principal Accounting Officer)
    
    March 16, 2007
 113




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##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Golden Telecom, Inc.
(In Thousands)
 COL. A
    
    COL. B
    
    COL. C
    
    COL. D
    
    COL. EAdditionsBalance at
    
    Charged to
    
    Reserves
    
    
    
    
    
    Balance atBeginning
    
    Costs and
    
    From
    
    
    
    
    
    EndDescription
    
    of Period
    
    Expenses
    
    Acquisitions
    
    Deductions
    
    of PeriodAllowance for doubtful accounts at
12/31/06
    
    $
    27,327
    

    
    $
    4,128
    

    
    $
    
    

    
    $
    (6,231
    )

    
    $
    25,224Allowance for doubtful accounts at
12/31/05
    
    
    23,205
    
    
    
    7,967
    
    
    
    53
    
    
    
    (3,898
    )
    
    
    27,327Allowance for doubtful accounts at
12/31/04
    
    
    13,896
    
    
    
    10,065
    
    
    
    117
    
    
    
    (873
    )
    
    
    23,205
 114




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit3.1
    
    Amended and Restated Certificate of Incorporation of Golden Telecom, Inc. (Incorporated herein by
reference to Exhibit 3.1 to the Companys registration statement on Form S-1 dated July 14, 1999 and
amendments (Commission File No. 333-82791)).3.2
    
    Amended and Restated By-laws of Golden Telecom, Inc. (Incorporated by reference to Exhibit 3.1 to the
Companys current report on Form 8-K dated December 12, 2005).4.1
    
    Specimen certificate representing shares of Common Stock. (Incorporated by reference to Exhibit 4.1 to
the Companys registration statement on Form S-1 dated July 14, 1999 (Commission File No. 333-82791)).10.1
    
    Shareholders Agreement among Golden Telecom, Inc., Alfa Telecom Limited, Nye Telenor East Invest AS,
OAO Rostelecom, Capital International Global Emerging Markets Private Equity Fund, L.P., Cavendish
Nominees Limited and First NIS Regional Fund SICAV. (Incorporated by reference to Exhibit 99.7 to the
Companys current report on From 8-K dated August 19, 2003).10.2
    
    Registration Rights Agreement among Golden Telecom, Inc., Alfa Telecom Limited, Nye Telenor East
Invest AS, OAO Rostelecom, Capital International Global Emerging Markets Private Equity Fund, L.P.,
Cavendish Nominees Limited and First NIS Regional Fund SICAV. (Incorporated by reference to Exhibit
99.5 to the Companys current report on From 8-K dated August 19, 2003).10.3
    
    Golden Telecom, Inc. 1999 Equity Participation Plan. (Incorporated by reference to the Companys
definitive proxy statement on Form DEF-14A dated April 25, 2000).10.4
    
    Amendment to the Golden Telecom, Inc. 1999 Equity Participation Plan. (Incorporated by reference to
the Companys definitive proxy statement on Form DEF-14A dated May 23, 2001).




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.5
    
    Form of Stock Option Award Agreement. (Incorporated by reference to Exhibit 10.8 to the Companys
annual report on Form 10-K for the year ended December 31, 2004).10.6(a)
    
    Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan. (Incorporated by reference to Exhibit 10.1
to the Companys current report on Form 8-K dated November 22, 2005).10.6(b)
    
    Amendment to the Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan. (Incorporated by reference
to Exhibit 10.1 to the Companys current report on Form 8-K dated December 12, 2005).10.7(a)
    
    Form of Award Agreement under the Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan.
(Incorporated by reference to Exhibit 10.2 to the Companys current report on Form 8-K dated November
22, 2005).10.7(b)
    
    Amended Form of Award Agreement under the Golden Telecom, Inc. 2005 Stock Appreciation Rights Plan.
(Incorporated by reference to Exhibit 10.2 to the Companys current report on Form 8-K dated December
12, 2005).10.8
    
    EDN Sovintel 2005 Stock Appreciation Rights Bonus Plan. (Incorporated by reference to Exhibit 10.3 to
the Companys current report on Form 8-K dated November 22, 2005).10.9
    
    Form of Award Agreement under the EDN Sovintel 2005 Stock Appreciation Bonus Rights Plan.
(Incorporated by reference to Exhibit 10.4 to the Companys current report on Form 8-K dated November
22, 2005).10.10
    
    Employment Agreement between Golden Telecom, Inc. and Jean-Pierre Vandromme, Chief Executive Officer.
(Incorporated by reference to Exhibit 99.2 to the Companys current report on Form 8-K dated July 18,
2005).10.11
    
    Employment Agreement between Golden TeleServices, Inc. and Alexander Vinogradov, President.
(Incorporated by reference to Exhibit 10.5 to the Companys annual report on Form 10-K for the year
ended December 31, 2004).10.12
    
    Amendment No. 1 to Employment Agreement between Golden TeleServices, Inc. and Alexander Vinogradov,
President. (Incorporated by reference to Exhibit 10.1 to the Companys current report on Form 8-K
dated October 24, 2005).10.13
    
    Employment Agreement between Golden Telecom, Inc. and Boris Svetlichny, Senior Vice-President, Chief
Finanical Officer and Treasurer. (Incorporated by reference to Exhibit 10.1 to the Companys current
report on Form 8-K dated January 26, 2006).10.14*
    
    Employment agreement between Golden Telecom, Inc. and Ilya Smirnov, Vice President, Interim General
Counsel and Corporate Secretary.10.15*
    
    Schedule of Compensation Arrangements with Directors.10.16
    
    Facility Agreement, dated January 25, 2007, entered into by Golden Telecom, inc., GTS Finance, Inc.,
and EDN Sovintel LLC with Lenders, Citibank N.A. London Branch and ING Bank N.W. as mandated lead
arrangers and Citibank International plc as agent. (Incorporated by reference to Exhibit 10.1 to the
Companys current report on Form 8-K dated January 25, 2007).10.17
    
    Stock Purchase Agreement, dated as of February 22, 2007, by and among EDN Sovintel LLC, Golden
Telecom, Inc., Inure Enterprises Ltd., and Rambert Management Limited. (Incorporated by reference to
Exhibit 10.1 to the Companys current report on Form 8-K dated February 22, 2007).10.18
    
    Registration Rights Agreement, dated as of February 22, 2007, by and between Golden Telecom, Inc. and
Inure Enterprises Ltd. (Incorporated by reference to Exhibit 10.2 to the Companys current report on
Form 8-K dated February 22, 2007).10.19
    
    Shareholders Agreement, dated as of February 22, 2007, by and among EDN Sovintel LLC, SFMT-CIS, Inc.,
Inure Enterprises Ltd., and ZAO Cortec. (Incorporated by reference to Exhibit 10.3 to the Companys
current report on Form 8-K dated February 22, 2007).10.20
    
    Share Purchase Agreement, dated
December 15, 2006, by and between SFMT-CIS, Inc. and Belmark
Enterprises, Inc. (Incorporated by reference to Exhibit 10.2 to the
Companys current report on Form 8-K dated December 15, 2006).

10.21
    
    Share Option Agreement, dated
December 15, 2006, by and between SFMT-CIS, Inc., Navic Consulting
Ltd., and Belmark Enterprises, Inc. (Incorporated by reference to
Exhibit 10.3 to the Companys current report on Form 8-K dated
December 15, 2006).

10.22
    
    Loan Agreement, dated
December 15, 2006, by and between GTS Finance, Inc. and Navic Consulting
Ltd. (Incorporated by reference to
Exhibit 10.4 to the Companys current report on Form 8-K dated
December 15, 2006).

10.23
    
    Pledge and Security Agreement, dated
December 15, 2006, by and between GTS Finance, Inc., Fortland Limited, and Navic Consulting
Ltd. (Incorporated by reference to
Exhibit 10.5 to the Companys current report on Form 8-K dated
December 15, 2006).












21.1*
    
    List of subsidiaries of Golden Telecom, Inc.23.1*
    
    Consent of Ernst & Young LLC, Independent Registered Public Accounting Firm.24.1*
    
    Powers of Attorney (included on signature page).31.1*
    
    Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit32.1*
    
    Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.