##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM
10-Q/A
 (Amendment
No. 1)
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 OR
 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.
  DELAWARE
    
    51-0391303(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 Representative Office Golden TeleServices, Inc.1 Kozhevnichesky ProezdMoscow, Russia
    
    115114(Address of principal executive office)
    
    (Zip Code)
 (011-7-495) 797-9300
 þ o
  o þ o
 o þ




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##### Table of Contents



GOLDEN TELECOM, INC.EXPLANATORY NOTE
      1.
    
    Part 1, Item 1  Financial
Statements; Condensed Consolidated Balance Sheet as of
March 31, 2007 (as restated), Condensed Statement of Operations for the
three months ended March 31, 2007 (as restated) and Condensed Consolidated Statement of Cash Flows
for the three months ended March 31, 2007 (as restated).2.
    
    Part 1, Item 2  Managements Discussion and Analysis of Financial
Condition and Results of Operations.3.
    
    Part 1, Item 4  Controls and Procedures.




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##### 



TABLE OF CONTENTS
 PagePART I.FINANCIAL INFORMATIONItem 1 Financial Statements (Unaudited)
    
    
    3Condensed
Consolidated Balance Sheets as of December 31, 2006 and
March 31, 2007 (as restated) (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2006 and 2007 (as restated) (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2007 (as restated) (Unaudited)
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements (as restated)
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations* (as restated)
    
    
    16Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4 Controls and Procedures (as restated)
    
    
    34PART II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    35Item 1A Risk Factors
    
    
    35Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3 Defaults Upon Senior Securities
    
    
    35Item 4 Submission of Matters to a Vote of Security Holders
    
    
    35Item 5 Other information
    
    
    35Item 6 Exhibits
    
    
    35Signatures
    
    
    36Certification of PEO Pursuant to Section 302Certification of PFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  
 *
    
    Please refer to the special note regarding forward-looking statements in this
section. 2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In Thousands, Except Share Data)
 (Unaudited)
 December 31,
    
    
    March 31,2006
    
    
    2007(as restated)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    18,413
    
    
    $
    91,615Accounts receivable, net of allowance for
doubtful accounts of $25,224 and $26,212 at
December 31, 2006 and March 31, 2007,
respectively
    
    
    147,719
    
    
    
    172,116VAT receivable
    
    
    21,486
    
    
    
    24,590Prepaid expenses
    
    
    11,371
    
    
    
    9,653Taxes receivable, excluding VAT
    
    
    6,466
    
    
    
    15,480Notes receivable
    
    
    379
    
    
    
    1,760Deferred tax asset
    
    
    11,098
    
    
    
    11,783Due from affiliates and related parties
    
    
    1,227
    
    
    
    2,198Other current assets
    
    
    13,246
    
    
    
    15,935TOTAL CURRENT ASSETS
    
    
    231,405
    
    
    
    345,130Property and equipment, net of accumulated
depreciation of $352,765 and $375,051 at
December 31, 2006 and March 31, 2007,
respectively
    
    
    552,341
    
    
    
    583,496Goodwill and intangible assets:Goodwill
    
    
    180,539
    
    
    
    182,601Intangible assets, net of accumulated
amortization of $90,314 and $92,581 at December
31, 2006 and March 31, 2007, respectively
    
    
    116,545
    
    
    
    182,907Net goodwill and intangible assets
    
    
    297,084
    
    
    
    365,508Investments in and advances to ventures
    
    
    11,886
    
    
    
    12,402Notes receivable
    
    
    2,500
    
    
    
    3,383Restricted cash
    
    
    233
    
    
    
    235Other non-current assets
    
    
    11,741
    
    
    
    16,595TOTAL ASSETS
    
    $
    1,107,190
    
    
    $
    1,326,749
  3




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GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In Thousands, Except Share Data)
 (Unaudited)
 December 31,
    
    
    March 31,2006
    
    
    2007(as restated)LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    146,058
    
    
    $
    193,682VAT payable
    
    
    2,725
    
    
    
    7,704Debt maturing within one year
    
    
    12,305
    
    
    
    4,676Current capital lease obligation
    
    
    753
    
    
    
    2,228Deferred revenue
    
    
    21,634
    
    
    
    23,213Due to affiliates and related parties
    
    
    4,505
    
    
    
    5,690Liability for acquisition
    
    
    
    
    
    
    38,621Other current liabilities
    
    
    611
    
    
    
    579TOTAL CURRENT LIABILITIES
    
    
    188,591
    
    
    
    276,393Long-term debt, less current portion
    
    
    29
    
    
    
    77,088Long-term deferred tax liability
    
    
    29,268
    
    
    
    46,105Long-term deferred revenue
    
    
    36,951
    
    
    
    41,834Long-term capital lease obligations
    
    
    1,591
    
    
    
    1,416Other non-current liabilities
    
    
    2,321
    
    
    
    3,563TOTAL LIABILITIES
    
    
    258,751
    
    
    
    446,399Minority interest
    
    
    31,263
    
    
    
    46,575SHAREHOLDERS EQUITYPreferred stock, $0.01 par value (10,000,000 shares
authorized; none issued and outstanding at December 31, 2006
and March 31, 2007)
    
    
    
    
    
    
    Common stock, $0.01 par value (100,000,000 shares authorized;
36,673,015 and 36,692,015 shares issued and outstanding at
December 31, 2006 and March 31, 2007, respectively)
    
    
    367
    
    
    
    367Additional paid-in capital
    
    
    674,993
    
    
    
    675,467Retained earnings
    
    
    66,744
    
    
    
    74,975Accumulated other comprehensive income
    
    
    75,072
    
    
    
    82,966TOTAL SHAREHOLDERS EQUITY
    
    
    817,176
    
    
    
    833,775TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,107,190
    
    
    $
    1,326,749
  4




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GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In Thousands, Except Per Share Data)
 (Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2007(as
restated)REVENUE:Telecommunication services
    
    $
    176,647
    
    
    $
    253,197Revenue from affiliates and related parties
    
    
    1,493
    
    
    
    2,542TOTAL REVENUE
    
    
    178,140
    
    
    
    255,739OPERATING COSTS AND EXPENSES:Access and network services (excluding depreciation
and amortization)
    
    
    93,393
    
    
    
    150,095Selling, general and administrative (excluding
depreciation and amortization)
    
    
    33,881
    
    
    
    48,986Depreciation and amortization
    
    
    22,649
    
    
    
    28,557TOTAL OPERATING COSTS AND EXPENSES
    
    
    149,923
    
    
    
    227,638INCOME FROM OPERATIONS
    
    
    28,217
    
    
    
    28,101OTHER INCOME (EXPENSE):Equity in earnings (losses) of ventures
    
    
    324
    
    
    
    (375
    )Interest income
    
    
    647
    
    
    
    268Interest expense
    
    
    (76
    )
    
    
    Foreign currency gains
    
    
    906
    
    
    
    267TOTAL OTHER INCOME
    
    
    1,801
    
    
    
    160Income before income taxes and minority interest
    
    
    30,018
    
    
    
    28,261Income taxes
    
    
    9,414
    
    
    
    10,130Minority interest
    
    
    1,138
    
    
    
    1,412Income before cumulative effect of a change in
accounting principle
    
    
    19,466
    
    
    
    16,719Cumulative effect of a change in accounting principle,
net of tax of $52
    
    
    681
    
    
    
    NET INCOME
    
    $
    18,785
    
    
    $
    16,719Basic earnings per share of common stock:Income before cumulative effect of a change in
accounting principle
    
    $
    0.54
    
    
    $
    0.46Cumulative effect of a change in
accounting principle
    
    
    0.02
    
    
    
    Net income per share  basic
    
    $
    0.52
    
    
    $
    0.46Weighted average common shares  basic
    
    
    36,473
    
    
    
    36,675Diluted earnings per share of common stock:Income before cumulative effect of a change in
accounting principle
    
    $
    0.53
    
    
    $
    0.45Cumulative effect of a change in
accounting principle
    
    
    0.02
    
    
    
    Net income per share  diluted
    
    $
    0.51
    
    
    $
    0.45Weighted average common shares  diluted
    
    
    36,657
    
    
    
    36,792Cash dividends per common share
    
    $
    0.20
    
    
    $
    
  5




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GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In Thousands)
 (Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2007(as restated)OPERATING ACTIVITIES:Net income
    
    $
    18,785
    
    
    $
    16,719Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:Depreciation
    
    
    17,701
    
    
    
    23,155Amortization
    
    
    4,948
    
    
    
    5,402Equity in (earnings) losses of ventures
    
    
    (324
    )
    
    
    375Foreign currency gain
    
    
    (906
    )
    
    
    (267
    )Bad debt expense
    
    
    2,808
    
    
    
    1,657Stock appreciation rights compensation expense
    
    
    1,893
    
    
    
    8,939Cumulative effect of a change in accounting principle, net
of tax of $52
    
    
    681
    
    
    
    Other
    
    
    (166
    )
    
    
    1,455Changes in assets and liabilities:Accounts receivable
    
    
    (15,513
    )
    
    
    (25,210
    )Accounts payable and accrued expenses
    
    
    8,112
    
    
    
    27,816VAT, net
    
    
    (4,432
    )
    
    
    2,007Other changes in assets and liabilities
    
    
    (5,345
    )
    
    
    (6,344
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    28,242
    
    
    
    55,704INVESTING ACTIVITIES:Purchases of property and equipment and intangible assets
    
    
    (38,090
    )
    
    
    (44,535
    )Acquisitions, net of cash acquired
    
    
    (2,942
    )
    
    
    (85
    )Restricted cash
    
    
    340
    
    
    
    (2
    )Other investing
    
    
    1,776
    
    
    
    (2,491
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (38,916
    )
    
    
    (47,113
    )FINANCING ACTIVITIES:Net proceeds from exercise of employee stock options
    
    
    235
    
    
    
    378Cash dividends paid
    
    
    (7,296
    )
    
    
    Proceeds from debt
    
    
    
    
    
    
    71,564Repayment of debt
    
    
    
    
    
    
    (7,707
    )Other financing
    
    
    (517
    )
    
    
    (197
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (7,578
    )
    
    
    64,038Effect of exchange rate changes on cash and cash equivalents
    
    
    338
    
    
    
    573Net increase (decrease) in cash and cash equivalents
    
    
    (17,914
    )
    
    
    73,202Cash and cash equivalents at beginning of period
    
    
    67,176
    
    
    
    18,413CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    49,262
    
    
    $
    91,615
  6




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GOLDEN TELECOM, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1: Basis of Presentation
   Note
2: Restatement of Unaudited Financial Statements
  As originally reported
    
    
    As restatedThree months ended March 31, 2007(in thousands, except per share data)CONSOLIDATED STATEMENT
OF OPERATIONS:Access and network services (excluding
depreciation and amortization)
    
    $
    150,401
    
    
    $
    150,095Selling, general and administrative
(excluding depreciation and
amortization)
    
    
    51,459
    
    
    
    48,986Income from operations
    
    
    25,322
    
    
    
    28,101Income taxes
    
    
    9,566
    
    
    
    10,130Net Income
    
    
    14,504
    
    
    
    16,719Net income per share  basic
    
    
    0.40
    
    
    $
    0.46Net income per share  diluted
    
    $
    0.39
    
    
    $
    0.45
 As originally reported
    
    
    As restatedAt March 31, 2007(in thousands)CONSOLIDATED BALANCE SHEET:Long-term deferred tax liability
    
    $
    45,541
    
    
    $
    46,105Other non-current liabilities
    
    
    6,342
    
    
    
    3,563Total liabilities
    
    
    448,614
    
    
    
    446,399Retained earnings
    
    
    72,760
    
    
    
    74,975Total shareholders equity
    
    
    831,560
    
    
    
    833,774
 Note 3: Summary of Significant Accounting Policies and Recent Accounting Pronouncements
 Summary of Significant Accounting Policies
  Accounting from Uncertainty in Income Taxes
    7




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   Income Taxes
 Accounting for Income Taxes. Interim Financial Reporting,
 Comparative Figures
  Recent Accounting Pronouncements
 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).
 Fair Value Measurements
 Fair Value Measurements
 Fair Value Option
 The Fair Value Option for Financial Assets
and Financials Liabilities  Including an Amendment of FASB Statement No. 115
 Note 4: Comprehensive Income
 Reporting Comprehensive Income Foreign Currency Translation
 8




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended March 31,2006
    
    
    2007(as restated)(in thousands)Net income
    
    $
    18,785
    
    
    $
    16,719Foreign currency translation adjustment
    
    
    
    
    
    
    7,894Comprehensive income
    
    $
    18,785
    
    
    $
    24,613
 Note 5: Intangible Assets
  As of December 31, 2006
    
    
    As of March 31, 2007(in thousands)Weighted Average
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    AccumulatedAmortization Lives
    
    
    Cost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationAmortized intangible assets:Telecommunications service contracts
    
    10 years
    
    $
    119,433
    
    
    $
    (49,450
    )
    
    $
    117,643
    
    
    $
    (50,085
    )Contract-based customer relationships
    
    5 years
    
    
    42,104
    
    
    
    (28,578
    )
    
    
    42,571
    
    
    
    (30,198
    )Licenses
    
    10 years
    
    
    26,948
    
    
    
    (4,295
    )
    
    
    96,292
    
    
    
    (3,538
    )Other intangible assets
    
    6 years
    
    
    18,374
    
    
    
    (7,991
    )
    
    
    18,982
    
    
    
    (8,760
    )Total
    
    
    
    
    
    $
    206,859
    
    
    $
    (90,314
    )
    
    $
    275,488
    
    
    $
    (92,581
    )
 Note 6: Net Income Per Share
   Three Months Ended March 31,2006
    
    
    2007(as restated)(in thousands, except per share data)Income before cumulative effect of a change in
accounting principle
    
    $
    19,466
    
    
    $
    16,719Weighted average outstanding of:Common stock shares
    
    
    36,473
    
    
    
    36,675Dilutive effect of:Employee stock options
    
    
    184
    
    
    
    117Common stock and common stock equivalents
    
    
    36,657
    
    
    
    36,792Net income per share before cumulative effect of
a change in accounting principle:Basic
    
    $
    0.54
    
    
    $
    0.46Diluted
    
    $
    0.53
    
    
    $
    0.45
 9




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note 7: Business Combinations and Investment Transactions
   Note 8: Shareholders Equity
 Common Stock
   Note 9: Stock Option and Stock Appreciation Rights Plans
  10




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  WeightedAverageExercise
    
    AggregateSARs
    
    Price
    
    Intrinsic Value(in thousands)Outstanding at January 1,
2006
    
    
    1,251,800
    
    
    $
    29.19SARs granted
    
    
    60,000
    
    
    
    31.46SARs exercised
    
    
    
    
    
    
    SARs expired
    
    
    
    
    
    
    SARs forfeited
    
    
    (4,000
    )
    
    
    28.89Outstanding at March 31,
2006
    
    
    1,307,800
    
    
    
    29.29
    
    
    $
    561Exercisable at March 31,
2006
    
    
    
    
    
    $
    
    
    
    $
    
 WeightedAverageExercise
    
    AggregateSARs
    
    Price
    
    Intrinsic Value(in thousands)Outstanding at January 1,
2007
    
    
    1,293,800
    
    
    $
    29.05SARs granted
    
    
    
    
    
    
    SARs exercised
    
    
    (305,500
    )
    
    
    27.88SARs expired
    
    
    
    
    
    
    SARs forfeited
    
    
    
    
    
    
    Outstanding at March 31,
2007
    
    
    988,300
    
    
    
    29.42
    
    
    $
    25,653Exercisable at March 31,
2007
    
    
    368,717
    
    
    $
    28.75
    
    
    $
    9,817
   Note 10: Commitments and Contingencies
 Tax Matters
    11




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Taxes on Other Than Incomes
  Russian Environment and Current Economic Situation
   Other Commitments and Contingencies
      Other Matters
  12




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
     Note 11: Investments in and Advances to Ventures
   As of December 31, 2006
    
    
    As of March 31, 2007(in thousands)Equity in net assets acquired
    
    $
    13,448
    
    
    $
    13,138Goodwill as part of investment
    
    
    1,313
    
    
    
    1,313Difference between fair value and historical value of
assets acquired
    
    
    (1,355
    )
    
    
    (1,420
    )Cash advances and other
    
    
    (1,520
    )
    
    
    (629
    )Total investments in and advances to ventures
    
    $
    11,886
    
    
    $
    12,402
  Note 12: Segment Information
 Line of Business Data
  13




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Adjustments to ReconcileBusiness Segment toConsolidated ResultsBusiness
    
    Carrier
    
    
    
    
    
    
    
    
    
    Corporate,
    
    Business
    
    
    
    
    
    Equityand
    
    and
    
    Consumer
    
    Mobile
    
    Other &
    
    Segment
    
    Consolidated
    
    Method
    
    AffiliateCorporate
    
    Operator
    
    Internet
    
    Services
    
    Eliminations
    
    Total
    
    Results
    
    Ventures
    
    Adjustments(in thousands)Three Months Ended
March 31, 2006Revenue from external
customers
    
    $
    103,359
    
    
    $
    62,423
    
    
    $
    12,259
    
    
    $
    2,590
    
    
    $
    
    
    
    $
    180,631
    
    
    $
    178,140
    
    
    $
    (3,879
    )
    
    $
    1,388Intersegment revenue
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    26,229
    
    
    
    7,033
    
    
    
    (363
    )
    
    
    534
    
    
    
    (4,454
    )
    
    
    28,979
    
    
    
    28,217
    
    
    
    (762
    )
    
    
    Identifiable assets
    
    
    498,620
    
    
    
    333,254
    
    
    
    68,821
    
    
    
    2,865
    
    
    
    17,116
    
    
    
    920,676
    
    
    
    892,136
    
    
    
    (28,540
    )
    
    
    Capital expenditures
    
    
    20,805
    
    
    
    8,035
    
    
    
    2,895
    
    
    
    47
    
    
    
    5
    
    
    
    31,787
    
    
    
    31,587
    
    
    
    (200
    )
    
    
    
 Adjustments to ReconcileBusiness Segment toConsolidated ResultsBusiness
    
    Carrier
    
    
    
    
    
    
    
    
    
    Corporate,
    
    Business
    
    
    
    
    
    Equityand
    
    and
    
    Consumer
    
    Mobile
    
    Other &
    
    Segment
    
    Consolidated
    
    Method
    
    AffiliateCorporate
    
    Operator
    
    Internet
    
    Services
    
    Eliminations
    
    Total
    
    Results
    
    Ventures
    
    Adjustments(in thousands)Three Months Ended
March 31, 2007(as restated)Revenue from external
customers
    
    $
    148,008
    
    
    $
    99,132
    
    
    $
    10,273
    
    
    $
    1,837
    
    
    $
    
    
    
    $
    259,250
    
    
    $
    255,739
    
    
    $
    (4,147
    )
    
    $
    636Intersegment revenue
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    33,445
    
    
    
    5,626
    
    
    
    (5,130
    )
    
    
    (381
    )
    
    
    (6,117
    )
    
    
    27,443
    
    
    
    28,101
    
    
    
    658
    
    
    
    Identifiable assets
    
    
    690,463
    
    
    
    490,205
    
    
    
    113,340
    
    
    
    15,062
    
    
    
    54,238
    
    
    
    1,363,308
    
    
    
    1,326,749
    
    
    
    (36,559
    )
    
    
    Capital expenditures
    
    
    29,641
    
    
    
    17,330
    
    
    
    7,147
    
    
    
    674
    
    
    
    6
    
    
    
    54,798
    
    
    
    48,390
    
    
    
    (6,408
    )
    
    
    
 Geographic Data
   Corporate,OtherCountries &
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Three months ended March 31, 2006Revenue
    
    $
    159,050
    
    
    $
    17,695
    
    
    $
    1,395
    
    
    $
    178,140Long-lived assets
    
    
    625,435
    
    
    
    46,281
    
    
    
    11,857
    
    
    
    683,573
 Corporate,OtherCountries &
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Three months ended March 31, 2007Revenue
    
    $
    232,398
    
    
    $
    22,989
    
    
    $
    352
    
    
    $
    255,739Long-lived assets
    
    
    873,834
    
    
    
    88,939
    
    
    
    18,611
    
    
    
    981,384
 14




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note 13: Supplemental Cash Flow Information
  Three months ended March 31,2006
    
    2007(in thousands)Amounts
payable in connection with business acquisitions
    
    $
    1,000
    
    
    $
    Capitalized leased assets
    
    
    
    
    
    
    1,568Amounts
payable for acquired assets
    
    
    
    
    
    
    38,621
 Note 14: Subsequent Events
   15




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ITEM 2. 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.
     Restatement
of Unaudited Financial Statements
  Recent Acquisitions
   16




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Regulatory Developments
   17




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Other Developments
     18




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Highlights and Outlook
        19




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20




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Critical Accounting Policies
  Revenue recognition policie
 Allowance for doubtful accounts policies
 21




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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;
 Critical Accounting Estimates
  22




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##### Table of Contents



Allowance for doubtful accounts;
 Tax provisions; Accounting for
Contingencies Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No.
109. Accounting for Income Taxes
 Useful lives of property and equipment and certain intangible assets;
 Business combinations; Business Combinations
 Results of Operations
   The discussion of our results of operations is organized as follows:
 
    
    Consolidated Results.Consolidated Results of Operations for the Three
Months Ended March 31, 2007, Compared to the Consolidated Results of
Operations for the Three Months Ended March 31, 2006
    
    Consolidated Financial Position.Consolidated Financial Position at
March 31, 2007, Compared to Consolidated Financial Position at
December 31, 2006
 23




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##### Table of Contents



Consolidated Results  Consolidated Results of Operations for the Three Months Ended March 31,
2007, Compared to the Consolidated Results of Operations for the Three Months Ended March 31, 2006
 Revenue
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Three Months
    
    
    For the Three MonthsEnded March 31, 2006
    
    
    Ended March 31, 2007(in millions)REVENUEBusiness and Corporate Services
    
    $
    103.2
    
    
    $
    147.8Carrier and Operator Services
    
    
    60.1
    
    
    
    95.8Consumer Internet Services
    
    
    12.2
    
    
    
    10.3Mobile Services
    
    
    2.6
    
    
    
    1.8TOTAL REVENUE
    
    $
    178.1
    
    
    $
    255.7
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Three Months
    
    
    For the Three MonthsEnded March 31, 2006
    
    
    Ended March 31, 2007(in millions)REVENUEMoscow
    
    $
    112.1
    
    
    $
    159.2Northwest region of Russia
    
    
    16.5
    
    
    
    25.7Other regions of Russia and CIS
    
    
    38.3
    
    
    
    56.6Ukraine
    
    
    17.7
    
    
    
    23.0Eliminations
    
    
    (6.5
    )
    
    
    (8.8
    )TOTAL REVENUE
    
    $
    178.1
    
    
    $
    255.7
 Business and Corporate Services.
   24




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##### Table of Contents



(in whole numbers)
    
    2006
    
    2007
    
    % ChangeBCS Moscow customer statistics on March 31:Total clients
    
    
    23,464
    
    
    
    23,770
    
    
    
    1
    %Business centers
    
    
    826
    
    
    
    961
    
    
    
    16
    %Trade centers
    
    
    71
    
    
    
    103
    
    
    
    45
    %Hotels
    
    
    50
    
    
    
    54
    
    
    
    8
    %Direct inward dialing lines
    
    
    129,300
    
    
    
    141,000
    
    
    
    9
    %Ethernet / Metropolitan Ethernet Network connections
    
    
    1,962
    
    
    
    2,807
    
    
    
    43
    %High speed Internet active contracts
    
    
    593
    
    
    
    1,157
    
    
    
    95
    %
    Carrier and Operator Services.
    Consumer Internet Services.
 25




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##### Table of Contents



Mobile Services.
 Expenses
  Consolidated Expenses
    
    
    Consolidated ExpensesFor the Three Months
    
    
    For the Three MonthsEnded March 31, 2006
    
    
    Ended March 31, 2007(as restated)(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    44.0
    
    
    $
    67.2Carrier and Operator Services
    
    
    40.1
    
    
    
    71.6Consumer Internet Services
    
    
    8.1
    
    
    
    9.8Mobile Services
    
    
    1.2
    
    
    
    1.3Corporate
    
    
    
    
    
    
    0.2TOTAL COST OF REVENUE
    
    
    93.4
    
    
    
    150.1Selling, general and administrative
    
    
    33.9
    
    
    
    49.0Depreciation and amortization
    
    
    22.6
    
    
    
    28.6Equity in (earnings)/ losses of
ventures
    
    
    (0.3
    )
    
    
    0.4Interest income
    
    
    (0.7
    )
    
    
    (0.3
    )Interest expense
    
    
    0.1
    
    
    
    Foreign currency gain
    
    
    (0.9
    )
    
    
    (0.3
    )Minority interest
    
    
    1.1
    
    
    
    1.4Provision for income taxes
    
    
    9.4
    
    
    
    10.1Cumulative effect of a change in
accounting principle, net of tax
    
    $
    0.7
    
    
    $
    
 Cost of Revenue
  Business
and Corporate Services.
   26




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##### Table of Contents



Carrier and Operator Services.
    Consumer Internet Services.
  Mobile Services.
 Selling, General and Administrative
  27




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##### Table of Contents



Depreciation and Amortization
  Equity in Earnings (Losses) of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Gain
  Minority Interest
  Provision for Income Taxes
  Net Income and Net Income per Share
    28




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Consolidated Financial Position  Significant Changes in Consolidated Financial Position at March
31, 2007, compared to Consolidated Financial Position at December 31, 2006
 Accounts Receivable
  Intangible Assets
  Other Non-Current Liabilities
  Minority Interest
  Stockholders Equity
  Income Taxes
  29




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Liquidity and Capital Resources
  Consolidated Cash Flows
    
    
    Consolidated Cash FlowsFor the Three Months
    
    
    For the Three MonthsEnded March 31, 2006
    
    
    Ended March 31, 2007(in millions)CASH FLOWSProvided by operating activities
    
    $
    28.3
    
    
    $
    55.7Used in investing activities
    
    
    (38.9
    )
    
    
    (47.1
    )(Used in) provided by financing
activities
    
    
    (7.6
    )
    
    
    64.0Effect of exchange rate changes
    
    
    0.3
    
    
    
    0.6Net (decrease) increase in cash
and cash equivalents
    
    $
    (17.9
    )
    
    $
    73.2
           30




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##### Table of Contents



Credit Rating Agency
    
    Rating
    
    OutlookStandard & Poors
    
    BB
    
    StableMoodys
    
    Ba3
    
    Stable
  31




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Contractual Obligations
  Payments
Due by Period (3)(4)(in thousands) (as restated)Less
    
    
    1 - 3
    
    
    4 - 5Total
    
    
    than 1 year
    
    
    years
    
    
    years
    
    
    ThereafterLong-term debt
    
    $
    83,906
    
    
    $
    52,814
    
    
    $
    23,153
    
    
    $
    7,939
    
    
    $
    Capital lease obligations
    
    
    4,516
    
    
    
    2,985
    
    
    
    1,531
    
    
    
    
    
    
    
    Non-cancelable lease
obligations
    
    
    34,178
    
    
    
    11,224
    
    
    
    18,340
    
    
    
    4,038
    
    
    
    576Purchase obligations (1)
    
    
    102,936
    
    
    
    33,406
    
    
    
    40,098
    
    
    
    20,141
    
    
    
    9,291Other long-term liabilities (2)
    
    
    3,563
    
    
    
    
    
    
    
    3,563
    
    
    
    
    
    
    
    Total
    
    $
    229,099
    
    
    $
    100,429
    
    
    $
    86,685
    
    
    $
    32,118
    
    
    $
    9,867
 
 (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.(4)
    
    FIN No. 48 liabilities of $8.9 million are excluded
from the Contractual Obligations table because we are not able to
make a reasonable reliable estimate of the period of cash settlement
with the respective taxing authority. 32




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Special Note Regarding Forward Looking Statements
     33




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures.
    Changes in internal controls over financial reporting.
  34




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Designation
    
    Description10.1
    
    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 is incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of the Company dated February 27, 2007.10.2
    
    Registration Rights Agreement, dated as of February 22, 2007, by and between Golden Telecom, Inc. and Inure Enterprises Ltd. is incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K of the Company dated February 27, 2007.10.3
    
    Shareholders Agreement, dated as of February 22, 2007, by and among EDN Sovintel LLC, SFMT-CIS, Inc., Inure Enterprises Ltd., and ZAO Cortec. is incorporated herein by reference to Exhibit 10.3 of the Current Report on Form 8-K of the Company dated February 27, 2007.10.4
    
    Guaranty, dated as of February 22, 2007, by and among Golden Telecom, Inc., EDN Sovintel LLC, Dawn Key Limited, and Mr. Alexander Mamut is incorporated herein by reference to Exhibit 10.4 of the Current Report on Form 8-K of the Company dated February 27, 2007.10.5
    
    Facility Agreement dated January 25, 2007 as amended and restated on March 22, 2007 is incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated March 28, 2007.31.1
    
    Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    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.
 35




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SIGNATURES
  GOLDEN TELECOM, INC.
(Registrant)By:
    
    /s/ BORIS SVETLICHNYName:
Title:
    
    Boris Svetlichny

Senior Vice-President, Chief Financial Officer and Treasurer(Principal Financial Officer)By:
Name:
    
    /s/ MICHAEL D. WILSON

Michael D. WilsonTitle:
    
    Vice-President and Corporate Controller
(Principal Accounting Officer)
  36




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##### Table of Contents



Item 6. Exhibits
 Designation
    
    Description10.1
    
    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 is incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of the Company dated February 27, 2007.10.2
    
    Registration Rights Agreement, dated as of February 22, 2007, by and between Golden Telecom, Inc. and Inure Enterprises Ltd. is incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K of the Company dated February 27, 2007.10.3
    
    Shareholders Agreement, dated as of February 22, 2007, by and among EDN Sovintel LLC, SFMT-CIS, Inc., Inure Enterprises Ltd., and ZAO Cortec. is incorporated herein by reference to Exhibit 10.3 of the Current Report on Form 8-K of the Company dated February 27, 2007.10.4
    
    Guaranty, dated as of February 22, 2007, by and among Golden Telecom, Inc., EDN Sovintel LLC, Dawn Key Limited, and Mr. Alexander Mamut is incorporated herein by reference to Exhibit 10.4 of the Current Report on Form 8-K of the Company dated February 27, 2007.10.5
    
    Facility Agreement dated January 25, 2007 as amended and restated on March 22, 2007 is incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated March 28, 2007.31.1
    
    Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    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.