##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (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, 2006
 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)
 (011-7-501) 797-9300
 þ o
  o þ o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1
    
    Condensed Consolidated Financial Statements of Golden Telecom, Inc. (unaudited)
    
    
    3Condensed Consolidated Balance Sheets as of December 31, 2005, and March 31, 2006
    
    
    4Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2005 and 2006
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2006
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations *
    
    
    17Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4
    
    Controls and Procedures
    
    
    34PART II.
    
    OTHER INFORMATION
    
    
    35Item 6
    
    Exhibits
    
    
    35Signatures
    
    
    
    
    36Certification of CEO Pursuant to Section 302Certification of CFO 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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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements of Golden Telecom, Inc.
 GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
 December 31,
    
    
    March 31,2005
    
    
    2006ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    67,176
    
    
    $
    49,262Accounts receivable, net of allowance for doubtful accounts of
$27,327 and $29,781 at December 31, 2005 and March 31, 2006, respectively
    
    
    91,709
    
    
    
    105,639VAT receivable
    
    
    21,986
    
    
    
    16,022Prepaid expenses
    
    
    8,083
    
    
    
    7,467Taxes
receivable, excluding VAT
    
    
    181
    
    
    
    6,653Deferred tax asset
    
    
    8,994
    
    
    
    9,556Other current assets
    
    
    12,828
    
    
    
    13,725TOTAL CURRENT ASSETS
    
    
    210,957
    
    
    
    208,324Property and equipment, net of accumulated depreciation of $247,096
and $263,804 at December 31, 2005 and March 31, 2006, respectively
    
    
    407,907
    
    
    
    419,964Goodwill and intangible assets:Goodwill
    
    
    149,249
    
    
    
    151,574Intangible assets, net of accumulated amortization of $60,648 and $65,596 at
December 31, 2005 and March 31, 2006, respectively
    
    
    93,880
    
    
    
    91,800Net goodwill and intangible assets
    
    
    243,129
    
    
    
    243,374Restricted cash
    
    
    566
    
    
    
    226Other non-current assets
    
    
    19,652
    
    
    
    20,248TOTAL ASSETS
    
    $
    882,211
    
    
    $
    892,136
  3




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##### Table of Contents



GOLDEN TELECOM, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
 December 31,
    
    
    March 31,2005
    
    
    2006LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    89,404
    
    
    $
    92,501VAT payable
    
    
    17,190
    
    
    
    6,786Current capital lease obligation
    
    
    1,941
    
    
    
    1,620Deferred revenue
    
    
    16,799
    
    
    
    18,273Due to affiliates and related parties
    
    
    2,470
    
    
    
    2,691Other current liabilities
    
    
    4,079
    
    
    
    4,965TOTAL CURRENT LIABILITIES
    
    
    131,883
    
    
    
    126,836Long-term debt, less current portion
    
    
    27
    
    
    
    27Long-term deferred tax liability
    
    
    22,287
    
    
    
    21,835Long-term deferred revenue
    
    
    30,878
    
    
    
    31,911Long-term capital lease obligations
    
    
    2,340
    
    
    
    2,144Other non-current liabilities
    
    
    
    
    
    
    1,337TOTAL LIABILITIES
    
    
    187,415
    
    
    
    184,090Minority interest
    
    
    19,693
    
    
    
    20,986SHAREHOLDERS EQUITYPreferred stock, $0.01 par value (10,000,000 shares
authorized; none issued and outstanding at December 31, 2005
and March 31, 2006)
    
    
    
    
    
    
    Common stock, $0.01 par value (100,000,000 shares authorized;
36,458,490 and 36,485,635 shares issued and outstanding at December 31,
2005 and March 31, 2006, respectively)
    
    
    365
    
    
    
    365Additional paid-in capital
    
    
    671,998
    
    
    
    672,011Deferred equity compensation
    
    
    (455
    )
    
    
    Retained earnings
    
    
    3,195
    
    
    
    14,684TOTAL SHAREHOLDERS EQUITY
    
    
    675,103
    
    
    
    687,060TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    882,211
    
    
    $
    892,136
  4




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GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
 Three Months Ended March 31,2005
    
    
    2006REVENUE:Telecommunication services
    
    $
    155,598
    
    
    $
    176,647Revenue from affiliates and related parties
    
    
    867
    
    
    
    1,493TOTAL REVENUE
    
    
    156,465
    
    
    
    178,140OPERATING COSTS AND EXPENSES:Access and network services (excluding depreciation
and amortization)
    
    
    79,997
    
    
    
    93,393Selling, general and administrative (excluding
depreciation and amortization)
    
    
    27,586
    
    
    
    33,881Depreciation and amortization
    
    
    19,721
    
    
    
    22,649TOTAL OPERATING COSTS AND EXPENSES
    
    
    127,304
    
    
    
    149,923INCOME FROM OPERATIONS
    
    
    29,161
    
    
    
    28,217OTHER INCOME (EXPENSE):Equity in earnings (losses) of ventures
    
    
    (98
    )
    
    
    324Interest income
    
    
    376
    
    
    
    647Interest expense
    
    
    (87
    )
    
    
    (76
    )Foreign currency gain
    
    
    364
    
    
    
    906TOTAL OTHER INCOME
    
    
    555
    
    
    
    1,801Income before minority interest and income taxes
    
    
    29,716
    
    
    
    30,018Minority interest
    
    
    546
    
    
    
    1,138Income taxes
    
    
    9,143
    
    
    
    9,414Income before cumulative effect of a change
in accounting principle
    
    
    20,027
    
    
    
    19,466Cumulative effect of a change in accounting
principle,
net of tax of $52
    
    
    
    
    
    
    681NET INCOME
    
    $
    20,027
    
    
    $
    18,785Basic earnings per share of common stock:Income before cumulative effect of
a change in accounting principle
    
    
    0.55
    
    
    
    0.54Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    0.02Net income per share  basic
    
    $
    0.55
    
    
    $
    0.52Weighted average common shares  basic
    
    
    36,324
    
    
    
    36,473Diluted earnings per share of common stock:Income before cumulative effect of
a change in accounting principle
    
    
    0.55
    
    
    
    0.53Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    0.02Net income per share  diluted
    
    $
    0.55
    
    
    $
    0.51Weighted average common shares  diluted
    
    
    36,575
    
    
    
    36,657Cash dividends per common share
    
    $
    0.20
    
    
    $
    0.20
  5




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GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 Three Months Ended March 31,2005
    
    
    2006OPERATING
ACTIVITIES:Net income
    
    $
    20,027
    
    
    $
    18,785Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:Depreciation
    
    
    15,182
    
    
    
    17,701Amortization
    
    
    4,539
    
    
    
    4,948Equity in (earnings) losses of ventures
    
    
    98
    
    
    
    (324
    )Foreign currency gain
    
    
    (364
    )
    
    
    (906
    )Bad debt expense
    
    
    2,609
    
    
    
    2,808Stock appreciation rights compensation expense
    
    
    
    
    
    
    1,893Cumulative effect of a change in accounting principle, net of tax
    
    
    
    
    
    
    681Other
    
    
    (878
    )
    
    
    (166
    )Changes in assets and liabilities:Accounts receivable
    
    
    (8,215
    )
    
    
    (15,513
    )Accounts payable and accrued expenses
    
    
    6,182
    
    
    
    8,112VAT, net
    
    
    1,126
    
    
    
    (4,432
    )Other changes in assets and liabilities
    
    
    (1,385
    )
    
    
    (5,345
    )NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    38,921
    
    
    
    28,242INVESTING ACTIVITIES:Purchases of property and equipment and intangible assets
    
    
    (21,717
    )
    
    
    (38,090
    )Acquisitions, net of cash acquired
    
    
    (946
    )
    
    
    (2,942
    )Restricted cash
    
    
    (4
    )
    
    
    340Other investing
    
    
    455
    
    
    
    1,776NET CASH USED IN INVESTING ACTIVITIES
    
    
    (22,212
    )
    
    
    (38,916
    )FINANCING ACTIVITIES:Net proceeds from exercise of employee stock options
    
    
    24
    
    
    
    235Cash dividends paid
    
    
    (7,264
    )
    
    
    (7,296
    )Other financing
    
    
    (633
    )
    
    
    (517
    )NET CASH USED IN FINANCING ACTIVITIES
    
    
    (7,873
    )
    
    
    (7,578
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    137
    
    
    
    338Net increase (decrease) in cash and cash equivalents
    
    
    8,973
    
    
    
    (17,914
    )Cash and cash equivalents at beginning of period
    
    
    53,699
    
    
    
    67,176CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    62,672
    
    
    $
    49,262
  6




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##### Table of Contents



GOLDEN TELECOM, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 1: Basis of Presentation
   Note 2: Summary of Significant Accounting Policies and Recent Accounting Pronouncements
 Summary of Significant Accounting Policies
 Intangible Assets
  As of December 31, 2005
    
    
    As of March 31, 2006(in thousands)Weighted Average
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    AccumulatedAmortization Lives
    
    Cost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationAmortized intangible assets:Telecommunications service contracts
    
    10 years
    
    $
    99,366
    
    
    $
    (32,009
    )
    
    $
    101,804
    
    
    $
    (34,810
    )Contract-based customer relationships
    
    5 years
    
    
    36,849
    
    
    
    (18,241
    )
    
    
    36,849
    
    
    
    (20,005
    )Licenses
    
    8 years
    
    
    7,176
    
    
    
    (3,182
    )
    
    
    7,208
    
    
    
    (3,394
    )Other intangible assets
    
    4 years
    
    
    11,137
    
    
    
    (7,216
    )
    
    
    11,535
    
    
    
    (7,387
    )Total
    
    
    
    $
    154,528
    
    
    $
    (60,648
    )
    
    $
    157,396
    
    
    $
    (65,596
    )
  Comprehensive Income
  Stock-Based Compensation
  7




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months EndedMarch 31, 2005(in thousands, except per share data)Net income, as reported
    
    $
    20,027Deduct: total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax
effects
    
    
    181Pro forma net income
    
    $
    19,846Net income per share:Basic  as reported
    
    $
    0.55Basic  pro forma
    
    
    0.55Diluted  as reported
    
    
    0.55Diluted  pro forma
    
    
    0.54
    Income Taxes
  8




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Use of Estimates in Preparation of Financial Statements
  Comparative Figures
  Recent Accounting Pronouncements
 Exchanges of Nonmonetary Assets
  Accounting Changes and Error Corrections
  Note 3: Net Income Per Share
  9




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedMarch 31, 2005
    
    
    March 31, 2006(in thousands, except earningsper share)Income before cumulative effect of a change in
accounting principle
    
    $
    20,027
    
    
    $
    19,466Weighted average outstanding of:Common stock shares
    
    
    36,324
    
    
    
    36,473Dilutive effect of:Employee stock options
    
    
    251
    
    
    
    184Common stock and common stock equivalents
    
    
    36,575
    
    
    
    36,657Earnings per share before cumulative effect
of a change in accounting principle:Basic
    
    $
    0.55
    
    
    $
    0.54Diluted
    
    $
    0.55
    
    
    $
    0.53
 Note 4: Business Combinations
   Note 5: Shareholders Equity
 Common Stock
   Dividends
  10




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note 6: Stock Option and Stock Appreciation Rights Plans
     11




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Three Months EndedMarch
31, 2006Weighted-average volatility
    
    
    51.0
    %Expected dividend yield
    
    
    2.7
    %Expected term
    
    1.84  5 yearsRisk-free rate
    
    
    4.8
    %
  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
    
    
    
    
    
    $
    
    
    
    $
    
  Note 7: Commitments and Contingencies
 Tax Matters
    12




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Russian Environment and Current Economic Situation
     Other Commitments and Contingencies
  13




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Other Matters
  Note 8: Investments in and Advances to Ventures
   As of December 31,
    
    
    As of March 31,2005
    
    
    2006(in thousands)Equity in net assets acquired
    
    $
    11,565
    
    
    $
    11,954Goodwill as part of investment
    
    
    1,313
    
    
    
    1,313Difference between fair value and historical value of
assets acquired
    
    
    (1,095
    )
    
    
    (1,160
    )Cash advances and other
    
    
    (894
    )
    
    
    (1,073
    )Total investments in and advances to ventures
    
    $
    10,889
    
    
    $
    11,034
  Note 9: Segment Information
 Line of Business Data
  14




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 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)Three Months Ended
March 31, 2005Revenue from external
Customers
    
    $
    88,087
    
    
    $
    52,979
    
    
    $
    11,784
    
    
    $
    3,623
    
    
    $
    
    
    
    $
    156,473
    
    
    $
    156,465
    
    
    $
    (551
    )
    
    $
    543Intersegment revenue
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    23,194
    
    
    
    7,745
    
    
    
    1,716
    
    
    
    1,091
    
    
    
    (4,632
    )
    
    
    29,114
    
    
    
    29,161
    
    
    
    47
    
    
    
    Identifiable assets
    
    
    449,927
    
    
    
    275,819
    
    
    
    58,503
    
    
    
    4,560
    
    
    
    39,390
    
    
    
    828,199
    
    
    
    824,561
    
    
    
    (3,638
    )
    
    
    Capital expenditures
    
    
    14,111
    
    
    
    5,387
    
    
    
    946
    
    
    
    97
    
    
    
    89
    
    
    
    20,630
    
    
    
    20,625
    
    
    
    (5
    )
    
    
    
 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)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
    )
    
    
    
 Geographic Data
   Corporate,OtherCountries &
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Three months ended
March 31, 2005Revenue
    
    $
    139,493
    
    
    $
    17,553
    
    
    $
    (581
    )
    
    $
    156,465Long-lived assets
    
    
    565,693
    
    
    
    27,757
    
    
    
    10,523
    
    
    
    603,973Three months ended
March 31, 2006Revenue
    
    $
    159,050
    
    
    $
    17,695
    
    
    $
    1,395
    
    
    $
    178,140Long-lived assets
    
    
    625,435
    
    
    
    46,281
    
    
    
    11,857
    
    
    
    683,573
 Note 10: Subsequent Events
  15




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  16




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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.
     17




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Recent Acquisitions
     Regulatory Developments
    18




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Other Developments
  19




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Highlights and Outlook
    20




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21




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Critical Accounting Policies
  Revenue recognition policie
 Allowance for doubtful accounts policies
 Long-lived asset recovery policies;
 Goodwill and assessment of impairment;
 Valuation allowance for deferred tax asset;
 Business segment information;
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Functional currency;
 Stock-based compensation;
 Critical Accounting Estimates
  Allowance for doubtful accounts;
 Tax provisions;
 Useful lives of property and equipment and certain intangible assets;
 Business combinations;
 Recent Accounting Pronouncements
   23




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Results of Operations
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The discussion of our results of operations is organized as follows:
 
    
    Consolidated Results.Consolidated Results of Operations for the Three
Months Ended March 31, 2006, compared to the Consolidated Results of
Operations for the Three Months Ended March 31, 2005
 
    
    Consolidated Financial Position.Consolidated Financial Position at
March 31, 2006, compared to Consolidated Financial Position at
December 31, 2005
 Consolidated Results  Consolidated Results of Operations for the Three Months Ended March 31, 2006, compared to the Consolidated Results of Operations for the Three Months Ended March 31, 2005
 Revenue
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Three Months
    
    
    For the Three MonthsEnded March 31, 2005
    
    
    Ended March 31, 2006(in millions)REVENUEBusiness and Corporate Services
    
    $
    88.1
    
    
    $
    103.2Carrier and Operator Services
    
    
    53.0
    
    
    
    60.1Consumer Internet Services
    
    
    11.8
    
    
    
    12.2Mobile Services
    
    
    3.6
    
    
    
    2.6TOTAL REVENUE
    
    $
    156.5
    
    
    $
    178.1
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Three Months
    
    
    For the Three MonthsEnded March 31, 2005
    
    
    Ended March 31, 2006(in millions)REVENUEMoscow
    
    $
    104.0
    
    
    $
    112.1Northwest region of Russia
    
    
    13.3
    
    
    
    16.5Other regions of Russia and CIS
    
    
    27.3
    
    
    
    38.3Ukraine
    
    
    17.6
    
    
    
    17.7Eliminations
    
    
    (5.7
    )
    
    
    (6.5
    )TOTAL REVENUE
    
    $
    156.5
    
    
    $
    178.1
 Business and Corporate Services.
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(in whole numbers)
    
    2005
    
    2006
    
    % ChangeBCS Moscow customer statistics on March 31:Total clients
    
    
    22,945
    
    
    
    23,464
    
    
    
    2
    %Business centers
    
    
    707
    
    
    
    826
    
    
    
    17
    %Trade centers
    
    
    55
    
    
    
    71
    
    
    
    29
    %Hotels
    
    
    47
    
    
    
    50
    
    
    
    6
    %Direct inward dialing lines
    
    
    119,838
    
    
    
    129,300
    
    
    
    8
    %Ethernet/Metropolitan Ethernet Network connections
    
    
    1,312
    
    
    
    1,962
    
    
    
    50
    %High speed Internet active contracts
    
    
    308
    
    
    
    593
    
    
    
    93
    %
    Carrier and Operator Services.
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Consumer Internet Services.
 Mobile Services.
 Expenses
  Consolidated Expenses
    
    Consolidated ExpensesFor the Three Months
    
    For the Three MonthsEnded March 31, 2005
    
    Ended March 31, 2006(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    37.6
    
    
    $
    44.0Carrier and Operator Services
    
    
    33.6
    
    
    
    40.1Consumer Internet Services
    
    
    7.3
    
    
    
    8.1Mobile Services
    

    1.5
    
    
    
    1.2TOTAL COST OF REVENUE
    
    
    80.0
    
    
    
    93.4Selling, general and administrative
    
    
    27.6
    
    
    
    33.9Depreciation and amortization
    
    
    19.7
    
    
    
    22.6Equity in (earnings)/ losses
of ventures
    
    
    0.1
    
    
    
    (0.3
    )Interest income
    
    
    (0.4
    )
    
    
    (0.7
    )Interest expense
    
    
    0.1
    
    
    
    0.1Foreign currency gain
    
    
    (0.3
    )
    
    
    (0.9
    )Minority interest
    
    
    0.6
    
    
    
    1.1Provision for income taxes
    
    
    9.1
    
    
    
    9.4Cumulative
effect of a change in
accounting principle, net of tax
    
    $
    
    
    
    $
    0.7
 Cost of Revenue
  Business and Corporate Services.
  27




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Carrier and Operator Services.
   Consumer Internet Services.
  Mobile Services.
 Selling, General and Administrative
  Depreciation and Amortization
  28




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Equity in Earnings (Losses) of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Gain
  Minority Interest
  Provision for Income Taxes
  Cumulative
Effect of a Change in Accounting Principle
  Net Income and Net Income per Share
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Consolidated Financial Position  Significant Changes in Consolidated Financial Position at March
31, 2006, compared to Consolidated Financial Position at December 31, 2005
 Accounts Receivable
  Intangible Assets
  Other Non-Current Liabilities
  Minority Interest
  Shareholders Equity
  Income Taxes
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Liquidity and Capital Resources
  Consolidated Cash Flows
    
    
    Consolidated Cash FlowsFor the Three Months
    
    
    For the Three MonthsEnded March 31, 2005
    
    
    Ended March 31, 2006(in millions)CASH FLOWSProvided by operating activities
    
    $
    38.9
    
    
    $
    28.3Used in investing activities
    
    
    (22.2
    )
    
    
    (38.9
    )Used in financing activities
    
    
    (7.9
    )
    
    
    (7.6
    )Effect of exchange rate changes
    
    
    0.2
    
    
    
    0.3Net increase (decrease) in
cash and cash equivalents
    
    $
    9.0
    
    
    $
    (17.9
    )
          31




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Contractual Obligations
  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
  34




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PART II. OTHER INFORMATION
 
 ITEM 6. Exhibits
 Designation
    
    Description31.1
    
    Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
  GOLDEN TELECOM, INC.(Registrant)By:
Name:
    
    /s/ BORIS SVETLICHNY

Boris SvetlichnyTitle:
    
    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



Exhibit Index
 Designation

Description31.1
    
    Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002