##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 (Commission file number: 0-27423)
 Golden Telecom, Inc.
  Delaware
(State of incorporation)
    
    51-0391303
(I.R.S. Employer Identification No.)
 Representation Office Golden TeleServices, Inc.
1 Kozhevnichesky Proezd
Moscow, Russia 115114
 (011-7-501) 797-9300
 þ o
 þ o




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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, 2004, and June 30, 2005
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004, and 2005
    
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004, and 2005
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations *
    
    
    16Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    33Item 4
    
    Controls and Procedures
    
    
    33Item 5
    
    Other information
    
    
    33PART II.
    
    OTHER INFORMATIONItem 6
    
    Exhibits
    
    
    34Signatures
    
    
    
    
    34Certification of Principal Executive Officer pursuant to Section 302Certification of Principal Financial Officer 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. Condensed Consolidated Financial Statements of Golden Telecom, Inc.
 GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In Thousands of US$, Except Share Data)
 December 31,
    
    June 30,2004
    
    2005(audited)
    
    (unaudited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    53,699
    
    
    $
    81,222Accounts receivable, net of allowance for doubtful accounts of
$23,205 and $27,259 at December 31, 2004 and June 30, 2005, respectively
    
    
    89,177
    
    
    
    95,536VAT receivable
    
    
    19,022
    
    
    
    18,464Prepaid expenses and advances to suppliers
    
    
    13,793
    
    
    
    10,354Deferred tax asset
    
    
    7,863
    
    
    
    9,622Other current assets
    
    
    16,738
    
    
    
    18,910TOTAL CURRENT ASSETS
    
    
    200,292
    
    
    
    234,108Property and equipment, net of accumulated depreciation of $185,781
and $214,563 at December 31, 2004 and June 30, 2005, respectively
    
    
    347,891
    
    
    
    358,258Goodwill and intangible assets:Goodwill
    
    
    146,254
    
    
    
    146,254Intangible assets, net of accumulated amortization of $41,999 and $50,943 at
December 31, 2004 and June 30, 2005, respectively
    
    
    101,316
    
    
    
    93,961Net goodwill and intangible assets
    
    
    247,570
    
    
    
    240,215Restricted cash
    
    
    1,012
    
    
    
    560Other non-current assets
    
    
    9,003
    
    
    
    9,252TOTAL ASSETS
    
    $
    805,768
    
    
    $
    842,393
  3




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GOLDEN TELECOM, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of US$, Except Share Data)
 December 31,
    
    June 30,2004
    
    2005(audited)
    
    (unaudited)LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    81,474
    
    
    $
    86,522VAT payable
    
    
    14,235
    
    
    
    16,468Current capital lease obligation
    
    
    2,301
    
    
    
    2,361Deferred revenue
    
    
    11,761
    
    
    
    14,161Due to affiliates and related parties
    
    
    3,199
    
    
    
    3,013Other current liabilities
    
    
    3,572
    
    
    
    3,228TOTAL CURRENT LIABILITIES
    
    
    116,542
    
    
    
    125,753Long-term debt, less current portion
    
    
    200
    
    
    
    253Long-term deferred tax liability
    
    
    24,244
    
    
    
    23,493Long-term deferred revenue
    
    
    23,124
    
    
    
    27,170Long-term capital lease obligations
    
    
    1,538
    
    
    
    393Other non-current liabilities
    
    
    2,001
    
    
    
    TOTAL LIABILITIES
    
    
    167,649
    
    
    
    177,062Minority interest
    
    
    11,738
    
    
    
    13,003SHAREHOLDERS EQUITYPreferred stock, $0.01 par value (10,000,000 shares
authorized; none issued and outstanding at December 31, 2004
and June 30, 2005)
    
    
    
    
    
    
    Common stock, $0.01 par value (100,000,000 shares authorized;
36,322,490 and 36,376,990 shares issued and outstanding at December 31,
2004 and June 30, 2005, respectively)
    
    
    363
    
    
    
    364Additional paid-in capital
    
    
    669,777
    
    
    
    670,472Accumulated deficit
    
    
    (43,759
    )
    
    
    (18,508
    )TOTAL SHAREHOLDERS EQUITY
    
    
    626,381
    
    
    
    652,328TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    805,768
    
    
    $
    842,393
  4




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GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In Thousands of US$, Except Per Share Data)
(unaudited)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005REVENUE:Telecommunication services
    
    $
    138,336
    
    
    $
    164,392
    
    
    $
    270,916
    
    
    $
    319,990Revenue from affiliates and related parties
    
    
    537
    
    
    
    1,117
    
    
    
    1,131
    
    
    
    1,984TOTAL REVENUE
    
    
    138,873
    
    
    
    165,509
    
    
    
    272,047
    
    
    
    321,974OPERATING COSTS AND EXPENSES:Access and network services (excluding depreciation
and amortization)
    
    
    70,215
    
    
    
    86,191
    
    
    
    138,494
    
    
    
    166,188Selling, general and administrative (excluding
depreciation and amortization)
    
    
    25,118
    
    
    
    28,828
    
    
    
    51,511
    
    
    
    56,414Depreciation and amortization
    
    
    18,312
    
    
    
    20,150
    
    
    
    35,680
    
    
    
    39,871TOTAL OPERATING COSTS AND EXPENSES
    
    
    113,645
    
    
    
    135,169
    
    
    
    225,685
    
    
    
    262,473INCOME FROM OPERATIONS
    
    
    25,228
    
    
    
    30,340
    
    
    
    46,362
    
    
    
    59,501OTHER INCOME (EXPENSE):Equity in earnings (losses) of ventures
    
    
    243
    
    
    
    (70
    )
    
    
    243
    
    
    
    (168
    )Interest income
    
    
    271
    
    
    
    524
    
    
    
    540
    
    
    
    900Interest expense
    
    
    (155
    )
    
    
    (350
    )
    
    
    (350
    )
    
    
    (437
    )Foreign currency losses
    
    
    (1,051
    )
    
    
    (603
    )
    
    
    (224
    )
    
    
    (239
    )TOTAL OTHER INCOME (EXPENSE)
    
    
    (692
    )
    
    
    (499
    )
    
    
    209
    
    
    
    56Income before minority interest and income taxes
    
    
    24,536
    
    
    
    29,841
    
    
    
    46,571
    
    
    
    59,557Minority interest
    
    
    224
    
    
    
    719
    
    
    
    539
    
    
    
    1,265Income taxes
    
    
    7,403
    
    
    
    9,355
    
    
    
    14,472
    
    
    
    18,498NET INCOME
    
    $
    16,909
    
    
    $
    19,767
    
    
    $
    31,560
    
    
    $
    39,794Basic earnings per share of common stock:Net income per share  basic
    
    $
    0.47
    
    
    $
    0.54
    
    
    $
    0.87
    
    
    $
    1.10Weighted average common shares  basic
    
    
    36,243
    
    
    
    36,334
    
    
    
    36,144
    
    
    
    36,329Diluted earnings per share of common stock:Net income per share  diluted
    
    $
    0.46
    
    
    $
    0.54
    
    
    $
    0.86
    
    
    $
    1.09Weighted average common shares  diluted
    
    
    36,539
    
    
    
    36,571
    
    
    
    36,523
    
    
    
    36,573Cash dividends per common share
    
    $
    0.20
    
    
    $
    0.20
    
    
    $
    0.40
    
    
    $
    0.40
  5




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GOLDEN TELECOM, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In Thousands of US$)
(unaudited)
 Six Months Ended June 30,2004
    
    2005OPERATING ACTIVITIESNet income
    
    $
    31,560
    
    
    $
    39,794Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:Depreciation
    
    
    26,735
    
    
    
    30,908Amortization
    
    
    8,945
    
    
    
    8,963Equity in (earnings) losses of ventures
    
    
    (243
    )
    
    
    168Foreign currency losses
    
    
    224
    
    
    
    239Bad debt expense
    
    
    4,320
    
    
    
    4,681Other
    
    
    (1,052
    )
    
    
    (1,445
    )Changes in assets and liabilities:Accounts receivable
    
    
    (13,662
    )
    
    
    (11,126
    )Accounts payable and accrued expenses
    
    
    3,402
    
    
    
    4,887VAT, net
    
    
    (78
    )
    
    
    2,796Other changes in assets and liabilities
    
    
    2,163
    
    
    
    6,367NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    62,314
    
    
    
    86,232INVESTING ACTIVITIESPurchases of property and equipment and intangible assets
    
    
    (54,368
    )
    
    
    (44,362
    )Acquisitions, net of cash acquired
    
    
    (14,782
    )
    
    
    (946
    )Restricted cash
    
    
    (3
    )
    
    
    452Other investing
    
    
    260
    
    
    
    1,300NET CASH USED IN INVESTING ACTIVITIES
    
    
    (68,893
    )
    
    
    (43,556
    )FINANCING ACTIVITIESRepayments of debt
    
    
    (525
    )
    
    
    Net proceeds from exercise of employee stock options
    
    
    4,168
    
    
    
    565Cash dividends paid
    
    
    (14,478
    )
    
    
    (14,543
    )Other financing
    
    
    (1,866
    )
    
    
    (1,085
    )NET CASH USED IN FINANCING ACTIVITIES
    
    
    (12,701
    )
    
    
    (15,063
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (96
    )
    
    
    (90
    )Net increase (decrease) in cash and cash equivalents
    
    
    (19,376
    )
    
    
    27,523Cash and cash equivalents at beginning of period
    
    
    65,180
    
    
    
    53,699CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    45,804
    
    
    $
    81,222
  6




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GOLDEN TELECOM, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1: Basis of Presentation
   Note 2: Summary of Significant Accounting Policies and New Accounting Pronouncements
 Summary of Significant Accounting Policies
 Goodwill and Intangible Assets
  As of December 31, 2004
    
    As of June 30, 2005(in thousands)Accumulated
    
    
    
    
    
    AccumulatedCost
    
    Amortization
    
    Cost
    
    AmortizationAmortized intangible assets:Telecommunications service contracts
    
    $
    92,250
    
    
    $
    (21,917
    )
    
    $
    93,008
    
    
    $
    (26,417
    )Contract-based customer relationships
    
    
    36,849
    
    
    
    (10,883
    )
    
    
    36,849
    
    
    
    (14,609
    )Licenses
    
    
    4,358
    
    
    
    (2,515
    )
    
    
    5,170
    
    
    
    (2,835
    )Other intangible assets
    
    
    9,858
    
    
    
    (6,684
    )
    
    
    9,877
    
    
    
    (7,082
    )Total
    
    $
    143,315
    
    
    $
    (41,999
    )
    
    $
    144,904
    
    
    $
    (50,943
    )
  Comprehensive Income
  7




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Stock-Based Compensation
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(in thousands, except per share data)Net income, as reported
    
    $
    16,909
    
    
    $
    19,767
    
    
    $
    31,560
    
    
    $
    39,794Deduct: total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects
    
    
    463
    
    
    
    149
    
    
    
    903
    

    
    
    330Pro forma net income
    
    $
    16,446
    
    
    $
    19,618
    
    
    $
    30,657
    
    
    $
    39,464Net income per share:Basic  as reported
    
    $
    0.47
    
    
    $
    0.54
    
    
    $
    0.87
    
    
    $
    1.10Basic  pro forma
    
    
    0.45
    
    
    
    0.54
    
    
    
    0.85
    
    
    
    1.09Diluted  as reported
    
    
    0.46
    
    
    
    0.54
    
    
    
    0.86
    
    
    
    1.09Diluted  pro forma
    
    
    0.45
    
    
    
    0.54
    
    
    
    0.84
    
    
    
    1.08
 Income Taxes
  Use of Estimates in Preparation of Financial Statements
  8




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Comparative Figures
  Recent Accounting Pronouncements
     9




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 3: Net Earnings Per Share
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2005
    
    2004
    
    2005(in thousands, except per share data)Net income
    
    $
    16,909
    
    
    $
    19,767
    
    
    $
    31,560
    
    
    $
    39,794Weighted average outstanding of:Common stock shares
    
    
    36,243
    
    
    
    36,334
    
    
    
    36,144
    
    
    
    36,329Dilutive effect of:Employee stock options
    
    
    296
    
    
    
    237
    
    
    
    379
    
    
    
    244Common stock and common stock equivalents
    
    
    36,539
    
    
    
    36,571
    
    
    
    36,523
    
    
    
    36,573Earnings per share:Basic
    
    $
    0.47
    
    
    $
    0.54
    
    
    $
    0.87
    
    
    $
    1.10Diluted
    
    $
    0.46
    
    
    $
    0.54
    
    
    $
    0.86
    
    
    $
    1.09
 Note 4: Business Combinations
   Note 5: Shareholders Equity
 Common Stock
  10




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Dividends
   Note 6: Commitments, Contingencies and Other Matters
 Tax Matters
    Russian Environment and Current Economic Situation
  11




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Other Commitments and Contingencies
    Change in Accounting Estimate
  12




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Other Matters
  Note 7: 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)Three Months Ended
June 30, 2004Revenue from external
customers
    
    $
    78,941
    
    
    $
    44,575
    
    
    $
    11,432
    
    
    $
    3,993
    
    
    $
    
    
    
    $
    138,941
    
    
    $
    138,873
    
    
    $
    (1,492
    )
    
    $
    1,424Intersegment revenue
    
    
    
    
    
    
    219
    
    
    
    
    
    
    
    
    
    
    
    (219
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    18,744
    
    
    
    7,983
    
    
    
    627
    
    
    
    1,218
    
    
    
    (2,949
    )
    
    
    25,623
    
    
    
    25,228
    
    
    
    (395
    )
    
    
    Identifiable assets
    
    
    429,728
    
    
    
    259,492
    
    
    
    57,743
    
    
    
    5,280
    
    
    
    28,978
    
    
    
    781,221
    
    
    
    777,083
    
    
    
    (4,138
    )
    
    
    Capital expenditures
    
    
    20,956
    
    
    
    8,552
    
    
    
    1,490
    
    
    
    221
    
    
    
    5
    
    
    
    31,224
    
    
    
    30,839
    
    
    
    (385
    )
    
    
    
 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
June 30, 2005Revenue from external
customers
    
    $
    96,432
    
    
    $
    54,455
    
    
    $
    10,728
    
    
    $
    3,905
    
    
    $
    
    
    
    $
    165,520
    
    
    $
    165,509
    
    
    $
    (615
    )
    
    $
    604Intersegment revenue
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    26,148
    
    
    
    7,116
    
    
    
    (553
    )
    
    
    1,019
    
    
    
    (3,340
    )
    
    
    30,390
    
    
    
    30,340
    
    
    
    (50
    )
    
    
    Identifiable assets
    
    
    459,911
    
    
    
    288,345
    
    
    
    58,375
    
    
    
    4,048
    
    
    
    35,050
    
    
    
    845,729
    
    
    
    842,393
    
    
    
    (3,336
    )
    
    
    Capital expenditures
    
    
    14,992
    
    
    
    5,983
    
    
    
    1,355
    
    
    
    83
    
    
    
    18
    
    
    
    22,431
    
    
    
    22,338
    
    
    
    (93
    )
    
    
    
 13




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 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)Six Months Ended
June 30, 2004Revenue from external
customers
    
    $
    151,884
    
    
    $
    90,097
    
    
    $
    22,570
    
    
    $
    7,607
    
    
    $
    
    
    
    $
    272,158
    
    
    $
    272,047
    
    
    $
    (2,730
    )
    
    $
    2,619Intersegment revenue
    
    
    
    
    
    
    363
    
    
    
    
    
    
    
    
    
    
    
    (363
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    35,177
    
    
    
    14,132
    
    
    
    1,580
    
    
    
    2,042
    
    
    
    (6,124
    )
    
    
    46,807
    
    
    
    46,362
    
    
    
    (445
    )
    
    
    Identifiable assets
    
    
    429,728
    
    
    
    259,492
    
    
    
    57,743
    
    
    
    5,280
    
    
    
    28,978
    
    
    
    781,221
    
    
    
    777,083
    
    
    
    (4,138
    )
    
    
    Capital expenditures
    
    
    41,697
    
    
    
    17,412
    
    
    
    2,390
    
    
    
    534
    
    
    
    21
    
    
    
    62,054
    
    
    
    61,434
    
    
    
    (620
    )
    
    
    
 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)Six Months Ended
June 30, 2005Revenue from external
customers
    
    $
    184,519
    
    
    $
    107,434
    
    
    $
    22,512
    
    
    $
    7,528
    
    
    $
    
    
    
    $
    321,993
    
    
    $
    321,974
    
    
    $
    (1,166
    )
    
    $
    1,147Intersegment revenue
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    49,342
    
    
    
    14,861
    
    
    
    1,163
    
    
    
    2,110
    
    
    
    (7,972
    )
    
    
    59,504
    
    
    
    59,501
    
    
    
    (3
    )
    
    
    Identifiable assets
    
    
    459,911
    
    
    
    288,345
    
    
    
    58,375
    
    
    
    4,048
    
    
    
    35,050
    
    
    
    845,729
    
    
    
    842,393
    
    
    
    (3,336
    )
    
    
    Capital expenditures
    
    
    29,103
    
    
    
    11,370
    
    
    
    2,301
    
    
    
    180
    
    
    
    107
    
    
    
    43,061
    
    
    
    42,963
    
    
    
    (98
    )
    
    
    
  Geographic Data
   14




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##### Table of Contents



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Corporate,OtherCountries &
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Three months ended
June 30, 2004Revenue
    
    $
    124,148
    
    
    $
    15,464
    
    
    $
    (739
    )
    
    $
    138,873Long-lived assets
    
    
    548,273
    
    
    
    26,709
    
    
    
    10,028
    
    
    
    585,010
 Corporate,OtherCountries &
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Three months ended
June 30, 2005Revenue
    
    $
    146,921
    
    
    $
    19,033
    
    
    $
    (445
    )
    
    $
    165,509Long-lived assets
    
    
    566,945
    
    
    
    28,992
    
    
    
    11,403
    
    
    
    607,340
 Corporate,OtherCountries &
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Six months ended June 30, 2004Revenue
    
    $
    244,730
    
    
    $
    28,885
    
    
    $
    (1,568
    )
    
    $
    272,047Long-lived assets
    
    
    548,273
    
    
    
    26,709
    
    
    
    10,028
    
    
    
    585,010
 Corporate,OtherCountries &
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Six months ended June 30, 2005Revenue
    
    $
    286,414
    
    
    $
    36,586
    
    
    $
    (1,026
    )
    
    $
    321,974Long-lived assets
    
    
    566,945
    
    
    
    28,992
    
    
    
    11,403
    
    
    
    607,340
 15




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   
    
    Business and Corporate Services (BCS). Using leased channels and 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 leased channels and 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.We provide dial-up 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.
    16




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##### Table of Contents



Recent Acquisitions
   Other Developments
       17




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##### Table of Contents



Highlights and Outlook
        18




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##### Table of Contents



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;
 19




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##### Table of Contents



Business segment information;
 Functional currency;
 Critical Accounting Estimates
  Allowance for doubtful accounts;
 Tax provisions;
 Useful lives of property and equipment and certain intangible assets;
 Business combinations;
 Recent Accounting Pronouncements
   20




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##### Table of Contents



Results of Operations
    
    
    Consolidated Results.Consolidated Results of Operations for the Three
Months Ended June 30, 2005 compared to the Consolidated Results of
Operations for the Three Months Ended June 30, 2004
    
    Consolidated Results.Consolidated Results of Operations for the Six
Months Ended June 30, 2005 compared to the Consolidated Results of
Operations for the Six Months Ended June 30, 2004
    
    Consolidated Financial Position.Consolidated Financial Position at
June 30, 2005 compared to Consolidated Financial Position at December
31, 2004
 21




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##### Table of Contents



Consolidated Results  Consolidated Results of Operations for the Three Months Ended June 30, 2005
Compared to the Consolidated Results of Operations for the Three Months Ended June 30, 2004
 Revenue
  Consolidated Revenue
    
    Consolidated RevenueFor the Three Months
    
    For the Three MonthsEnded June 30, 2004
    
    Ended June 30, 2005(in millions)REVENUEBusiness and Corporate Services
    
    $
    78.9
    
    
    $
    96.4Carrier and Operator Services
    
    
    44.7
    
    
    
    54.5Consumer Internet Services
    
    
    11.4
    
    
    
    10.7Mobile Services
    
    
    4.0
    
    
    
    3.9Eliminations
    
    
    (0.2
    )
    
    
    TOTAL REVENUE
    
    $
    138.8
    
    
    $
    165.5
 Business and Corporate Services.
  Carrier and Operator Services.
  Consumer Internet Services.
 22




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##### Table of Contents



Mobile Services.
 Expenses
  Consolidated Expenses
    
    Consolidated ExpensesFor the Three Months Ended
    
    For the Three Months EndedJune 30, 2004
    
    June 30, 2005(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    34.3
    
    
    $
    41.3Carrier and Operator Services
    
    
    27.8
    
    
    
    35.8Consumer Internet Services
    
    
    6.8
    
    
    
    7.3Mobile Services
    
    
    1.5
    
    
    
    1.8Eliminations
    
    
    (0.2
    )
    
    
    TOTAL COST OF REVENUE
    
    
    70.2
    
    
    
    86.2Selling, general and
administrative
    
    
    25.1
    
    
    
    28.8Depreciation and amortization
    
    
    18.3
    
    
    
    20.2Equity in (earnings) losses of
ventures
    
    
    (0.2
    )
    
    
    0.1Interest income
    
    
    (0.3
    )
    
    
    (0.5
    )Interest expense
    
    
    0.1
    
    
    
    0.3Foreign currency loss
    
    
    1.0
    
    
    
    0.5Minority interest
    
    
    0.3
    
    
    
    0.7Provision for income taxes
    
    $
    7.4
    
    
    $
    9.4
 Cost of Revenue
  Business and Corporate Services.
  Carrier and Operator Services.
 23




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##### Table of Contents



Consumer
Internet Services.
 Mobile
Services.
 Selling, General and Administrative
  Depreciation and Amortization
  Equity in (Earning) Losses of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Loss
  24




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##### Table of Contents



Minority Interest
  Provision for Income Taxes
  Net Income and Net Income per Share
     Consolidated Results  Consolidated Results of Operations for the Six Months Ended June 30, 2005
Compared to the Consolidated Results of Operations for the Six Months Ended June 30, 2004
 Revenue
  Consolidated Revenue
    
    Consolidated RevenueFor the Six Months
    
    For the Six MonthsEnded June 30, 2004
    
    Ended June 30, 2005(in millions)REVENUEBusiness and Corporate Services
    
    $
    151.8
    
    
    $
    184.5Carrier and Operator Services
    
    
    90.4
    
    
    
    107.5Consumer Internet Services
    
    
    22.5
    
    
    
    22.5Mobile Services
    
    
    7.6
    
    
    
    7.5Eliminations
    
    
    (0.3
    )
    
    
    TOTAL REVENUE
    
    $
    272.0
    
    
    $
    322.0
 25




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##### Table of Contents



Business and Corporate Services.
  Carrier and Operator Services.
  Consumer Internet Services.
 Mobile Services.
 26




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##### Table of Contents



Expenses
  Consolidated Expenses
    
    Consolidated ExpensesFor the Six Months Ended
    
    For the Six Months EndedJune 30, 2004
    
    June 30, 2005(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    64.9
    
    
    $
    78.9Carrier and Operator Services
    
    
    57.7
    
    
    
    69.4Consumer Internet Services
    
    
    13.2
    
    
    
    14.6Mobile Services
    
    
    3.0
    
    
    
    3.3Eliminations
    
    
    (0.3
    )
    
    
    TOTAL COST OF REVENUE
    
    
    138.5
    
    
    
    166.2Selling, general and
administrative
    
    
    51.5
    
    
    
    56.4Depreciation and amortization
    
    
    35.7
    
    
    
    39.9Equity in (earnings) losses of
ventures
    
    
    (0.2
    )
    
    
    0.2Interest income
    
    
    (0.6
    )
    
    
    (0.9
    )Interest expense
    
    
    0.3
    
    
    
    0.4Foreign currency loss
    
    
    0.2
    
    
    
    0.2Minority interest
    
    
    0.5
    
    
    
    1.3Provision for income taxes
    
    $
    14.5
    
    
    $
    18.5
 Cost of Revenue
  Business and Corporate Services.
  Carrier and Operator Services.
  27




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##### Table of Contents



Consumer Internet
Services.
 Mobile
Services.
 Selling, General and Administrative
  Depreciation and Amortization
  Equity in (Earning) Losses of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Loss
  Minority Interest
  28




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##### Table of Contents



Provision for Income Taxes
  Net Income and Net Income per Share
     Consolidated Financial Position  Significant Changes in Consolidated Financial Position at June
30, 2005, compared to Consolidated Financial Position at December 31, 2004
 Accounts Receivable
  Intangible Assets
  Other Non-current Liabilities
  29




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##### Table of Contents



Minority Interest
  Stockholders Equity
  Income Taxes
  Liquidity and Capital Resources
      30




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##### Table of Contents



Contractual Obligations
  31




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Special Note Regarding Forward Looking Statements
     32




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##### Table of Contents



ITEM 3. Quantitative and Qualitative disclosures About Market Risk
  
 ITEM 4. Controls and Procedures
  
 ITEM 5. Other Information
  33




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 6. Exhibits
 Designation
    
    Description31.1
    
    Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Principal 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
 34




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##### Table of Contents



SIGNATURES
  GOLDEN TELECOM, INC.
(Registrant)By:
    /s/ BRIAN A. RICHName: Brian A. RichTitle:
    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)  35




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##### Table of Contents



EXHIBIT INDEX
 Designation
    
    Description31.1
    
    Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Principal 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
 36