##### 



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 September 30, 2005
 (Commission file number: 0-27423)
 Golden Telecom, Inc.
  Delaware
(State of incorporation)
    
    51-0391303
(I.R.S. Employer Identification No.)
 Representative Office Golden TeleServices, Inc.
1 Kozhevnichesky Proezd
Moscow, Russia 115114
 (011-7-501) 797-9300
 þ 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, 2004,
and September 30, 2005
    
    3Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 2004 and 2005
    
    5Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2004 and 2005
    
    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
    
    35Item 4
    
    Controls and Procedures
    
    35Item 5
    
    Other information
    
    35PART II.
    
    OTHER INFORMATIONItem 6
    
    Exhibits
    
    36Signatures
    
    37
 
 *
    
    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,
    
    
    September 30,2004
    
    
    2005(audited)
    
    (unaudited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    53,699
    
    
    $
    85,950Accounts receivable, net of allowance for doubtful accounts of
$23,205 and $28,290 at December 31, 2004 and September 30, 2005,
respectively
    
    
    89,177
    
    
    
    98,718VAT receivable
    
    
    19,022
    
    
    
    19,384Prepaid expenses and advances to suppliers
    
    
    13,793
    
    
    
    11,171Deferred tax asset
    
    
    7,863
    
    
    
    8,827Other current assets
    
    
    16,738
    
    
    
    14,607TOTAL CURRENT ASSETS
    
    
    200,292
    
    
    
    238,657Property and equipment, net of accumulated depreciation of $185,781
and $229,866 at December 31, 2004 and September 30, 2005, respectively
    
    
    347,891
    
    
    
    374,212Goodwill and intangible assets:Goodwill
    
    
    146,254
    
    
    
    148,507Intangible assets, net of accumulated amortization of $41,999 and $55,422 at
December 31, 2004 and September 30, 2005, respectively
    
    
    101,316
    
    
    
    93,743Net goodwill and intangible assets
    
    
    247,570
    
    
    
    242,250Restricted cash
    
    
    1,012
    
    
    
    563Other non-current assets
    
    
    9,003
    
    
    
    9,197TOTAL ASSETS
    
    $
    805,768
    
    
    $
    864,879
  3




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##### 



GOLDEN TELECOM, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands of US$, Except Share Data)
 December 31,
    
    
    September 30,2004
    
    
    2005(audited)
    
    (unaudited)LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    81,474
    
    
    $
    89,778VAT payable
    
    
    14,235
    
    
    
    18,557Current
capital lease obligations
    
    
    2,301
    
    
    
    2,429Deferred revenue
    
    
    11,761
    
    
    
    15,103Due to affiliates and related parties
    
    
    3,199
    
    
    
    1,981Other current liabilities
    
    
    3,572
    
    
    
    3,174TOTAL CURRENT LIABILITIES
    
    
    116,542
    
    
    
    131,022Long-term debt, less current portion
    
    
    200
    
    
    
    253Long-term deferred tax liability
    
    
    24,244
    
    
    
    23,551Long-term deferred revenue
    
    
    23,124
    
    
    
    28,928Long-term capital lease obligations
    
    
    1,538
    
    
    
    2,812Other non-current liabilities
    
    
    2,001
    
    
    
    TOTAL LIABILITIES
    
    
    167,649
    
    
    
    186,566Minority interest
    
    
    11,738
    
    
    
    14,329SHAREHOLDERS EQUITYPreferred stock, $0.01 par value (10,000,000 shares
authorized; none issued and outstanding at December 31, 2004
and September 30, 2005)
    
    
    
    
    
    
    Common stock, $0.01 par value (100,000,000 shares authorized;
36,322,490 and 36,425,990 shares issued and outstanding at December 31,
2004 and September 30, 2005, respectively)
    
    
    363
    
    
    
    364Additional paid-in capital
    
    
    669,777
    
    
    
    671,018Accumulated deficit
    
    
    (43,759
    )
    
    
    (7,398
    )TOTAL SHAREHOLDERS EQUITY
    
    
    626,381
    
    
    
    663,984TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    805,768
    
    
    $
    864,879
  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
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005REVENUE:Telecommunication services
    
    $
    152,213
    
    
    $
    168,716
    
    
    $
    423,129
    
    
    $
    488,706Revenue from affiliates and related parties
    
    
    500
    
    
    
    1,214
    
    
    
    1,631
    
    
    
    3,198TOTAL REVENUE
    
    
    152,713
    
    
    
    169,930
    
    
    
    424,760
    
    
    
    491,904OPERATING COSTS AND EXPENSES:Access and network services (excluding depreciation
and amortization)
    
    
    77,953
    
    
    
    88,345
    
    
    
    216,447
    
    
    
    254,533Selling, general and administrative (excluding
depreciation and amortization)
    
    
    29,518
    
    
    
    30,967
    
    
    
    81,029
    
    
    
    87,381Depreciation and amortization
    
    
    19,504
    
    
    
    20,594
    
    
    
    55,184
    
    
    
    60,465TOTAL OPERATING COSTS AND EXPENSES
    
    
    126,975
    
    
    
    139,906
    
    
    
    352,660
    
    
    
    402,379INCOME FROM OPERATIONS
    
    
    25,738
    
    
    
    30,024
    
    
    
    72,100
    
    
    
    89,525OTHER INCOME (EXPENSE):Equity in earnings of ventures
    
    
    7
    
    
    
    669
    
    
    
    250
    
    
    
    501Interest income
    
    
    241
    
    
    
    772
    
    
    
    781
    
    
    
    1,672Interest expense
    
    
    (123
    )
    
    
    (94
    )
    
    
    (473
    )
    
    
    (531
    )Foreign currency losses
    
    
    (443
    )
    
    
    (125
    )
    
    
    (667
    )
    
    
    (364
    )TOTAL OTHER INCOME (EXPENSE)
    
    
    (318
    )
    
    
    1,222
    
    
    
    (109
    )
    
    
    1,278Income before minority interest and income taxes
    
    
    25,420
    
    
    
    31,246
    
    
    
    71,991
    
    
    
    90,803Minority interest
    
    
    245
    
    
    
    837
    
    
    
    784
    
    
    
    2,102Income taxes
    
    
    9,064
    
    
    
    12,014
    
    
    
    23,536
    
    
    
    30,512NET INCOME
    
    $
    16,111
    
    
    $
    18,395
    
    
    $
    47,671
    
    
    $
    58,189Basic earnings per share of common stock:Net income
per share  basic
    
    $
    0.44
    
    
    $
    0.51
    
    
    $
    1.32
    
    
    $
    1.60Weighted
average common shares  basic
    
    
    36,278
    
    
    
    36,411
    
    
    
    36,200
    
    
    
    36,356Diluted earnings per share of common stock:Net income
per share  diluted
    
    $
    0.44
    
    
    $
    0.50
    
    
    $
    1.30
    
    
    $
    1.59Weighted
average common shares  diluted
    
    
    36,551
    
    
    
    36,637
    
    
    
    36,544
    
    
    
    36,595Cash dividends per common share
    
    $
    
    
    
    $
    0.20
    
    
    $
    0.40
    
    
    $
    0.60
  5




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##### 



GOLDEN TELECOM, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of US$)
(unaudited)
 Nine Months Ended September 30,2004
    
    
    2005OPERATING ACTIVITIESNet income
    
    $
    47,671
    
    
    $
    58,189Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:Depreciation
    
    
    41,606
    
    
    
    47,021Amortization
    
    
    13,578
    
    
    
    13,444Equity in earnings of ventures
    
    
    (250
    )
    
    
    (501
    )Foreign currency losses
    
    
    667
    
    
    
    364Other
    
    
    (67
    )
    
    
    232Changes in assets and liabilities:Accounts receivable
    
    
    (15,535
    )
    
    
    (8,602
    )Accounts payable and accrued expenses
    
    
    22,079
    
    
    
    10,071VAT, net
    
    
    2,984
    
    
    
    3,849Other changes in assets and liabilities
    
    
    (2,895
    )
    
    
    4,235NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    109,838
    
    
    
    128,302INVESTING ACTIVITIESPurchases of property and equipment and intangible assets
    
    
    (86,062
    )
    
    
    (70,330
    )Acquisitions, net of cash acquired
    
    
    (15,022
    )
    
    
    (4,791
    )Restricted cash
    
    
    (5
    )
    
    
    449Other investing
    
    
    932
    
    
    
    2,243NET CASH USED IN INVESTING ACTIVITIES
    
    
    (100,157
    )
    
    
    (72,429
    )FINANCING ACTIVITIESRepayments of debt
    
    
    (525
    )
    
    
    Proceeds from exercise of employee stock options
    
    
    4,220
    
    
    
    1,003Cash dividends paid
    
    
    (14,478
    )
    
    
    (21,828
    )Other financing
    
    
    (2,540
    )
    
    
    (2,660
    )NET CASH USED IN FINANCING ACTIVITIES
    
    
    (13,323
    )
    
    
    (23,485
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (249
    )
    
    
    (137
    )Net increase (decrease) in cash and cash equivalents
    
    
    (3,891
    )
    
    
    32,251Cash and cash equivalents at beginning of period
    
    
    65,180
    
    
    
    53,699CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    61,289
    
    
    $
    85,950
  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 September 30, 2005(in thousands)Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationAmortized intangible assets:Telecommunications service contracts
    
    $
    92,250
    
    
    $
    (21,917
    )
    
    $
    96,164
    
    
    $
    (28,949
    )Contract-based customer relationships
    
    
    36,849
    
    
    
    (10,883
    )
    
    
    36,849
    
    
    
    (16,478
    )Licenses
    
    
    4,358
    
    
    
    (2,515
    )
    
    
    5,348
    
    
    
    (2,997
    )Other intangible assets
    
    
    9,858
    
    
    
    (6,684
    )
    
    
    10,804
    
    
    
    (6,998
    )Total
    
    $
    143,315
    
    
    $
    (41,999
    )
    
    $
    149,165
    
    
    $
    (55,422
    )
  Comprehensive Income
  7




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Stock-Based Compensation
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands, except per share data)Net income, as reported
    
    $
    16,111
    
    
    $
    18,395
    
    
    $
    47,671
    
    
    $
    58,189Deduct: total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects
    
    
    454
    
    
    
    145
    
    
    
    1,357
    
    
    
    475Pro forma net income
    
    $
    15,657
    
    
    $
    18,250
    
    
    $
    46,314
    
    
    $
    57,714Net income per share:Basic  as reported
    
    $
    0.44
    
    
    $
    0.51
    
    
    $
    1.32
    
    
    $
    1.60Basic  pro forma
    
    
    0.43
    
    
    
    0.50
    
    
    
    1.28
    
    
    
    1.59Diluted  as reported
    
    
    0.44
    
    
    
    0.50
    
    
    
    1.30
    
    
    
    1.59Diluted  pro forma
    
    
    0.43
    
    
    
    0.50
    
    
    
    1.27
    
    
    
    1.58
 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
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands, except per share data)Net income
    
    $
    16,111
    
    
    $
    18,395
    
    
    $
    47,671
    
    
    $
    58,189Weighted average outstanding of:Common stock shares
    
    
    36,278
    
    
    
    36,411
    
    
    
    36,200
    
    
    
    36,356Dilutive effect of:Employee stock options
    
    
    273
    
    
    
    226
    
    
    
    344
    
    
    
    239Common stock and common stock equivalents
    
    
    36,551
    
    
    
    36,637
    
    
    
    36,544
    
    
    
    36,595Earnings per share:Basic
    
    $
    0.44
    
    
    $
    0.51
    
    
    $
    1.32
    
    
    $
    1.60Diluted
    
    $
    0.44
    
    
    $
    0.50
    
    
    $
    1.30
    
    
    $
    1.59
 Note 4: Business Combinations
    10




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GOLDEN TELECOM, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 5: Shareholders Equity
 Common Stock
   Dividends
    Note 6: Commitments, Contingencies and Other Matters
 Tax Matters
   11




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GOLDEN TELECOM, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Russian Environment and Current Economic Situation
      Other Commitments and Contingencies
  12




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GOLDEN TELECOM, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Change in Accounting Estimate
  Capital Lease Obligation
  Other Matters
  13




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##### 



GOLDEN TELECOM, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 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
September 30, 2004Revenue from external
customers
    
    $
    84,491
    
    
    $
    53,152
    
    
    $
    10,878
    
    
    $
    4,173
    
    
    $
    
    
    
    $
    152,694
    
    
    $
    152,713
    
    
    $
    (1,175
    )
    
    $
    1,194Intersegment revenue
    
    
    
    
    
    
    277
    
    
    
    
    
    
    
    
    
    
    
    (277
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    19,554
    
    
    
    7,061
    
    
    
    497
    
    
    
    1,324
    
    
    
    (2,635
    )
    
    
    25,801
    
    
    
    25,738
    
    
    
    (63
    )
    
    
    Identifiable assets
    
    
    449,752
    
    
    
    267,709
    
    
    
    59,796
    
    
    
    5,351
    
    
    
    26,322
    
    
    
    808,930
    
    
    
    805,001
    
    
    
    (3,929
    )
    
    
    Capital expenditures
    
    
    18,579
    
    
    
    6,883
    
    
    
    1,250
    
    
    
    186
    
    
    
    38
    
    
    
    26,936
    
    
    
    26,579
    
    
    
    (357
    )
    
    
    
 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
September 30, 2005Revenue from external
customers
    
    $
    99,544
    
    
    $
    56,736
    
    
    $
    10,093
    
    
    $
    3,558
    
    
    $
    
    
    
    $
    169,931
    
    
    $
    169,930
    
    
    $
    (603
    )
    
    $
    602Intersegment revenue
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    27,811
    
    
    
    8,000
    
    
    
    (1,240
    )
    
    
    857
    
    
    
    (5,314
    )
    
    
    30,114
    
    
    
    30,024
    
    
    
    (90
    )
    
    
    Identifiable assets
    
    
    473,149
    
    
    
    295,295
    
    
    
    61,762
    
    
    
    3,724
    
    
    
    33,909
    
    
    
    867,839
    
    
    
    864,879
    
    
    
    (2,960
    )
    
    
    Capital expenditures
    
    
    21,406
    
    
    
    7,933
    
    
    
    3,690
    
    
    
    79
    
    
    
    17
    
    
    
    33,125
    
    
    
    32,995
    
    
    
    (130
    )
    
    
    
 14




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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)Nine
Months Ended
September 30, 2004Revenue from external
customers
    
    $
    236,375
    
    
    $
    143,249
    
    
    $
    33,448
    
    
    $
    11,780
    
    
    $
    
    
    
    $
    424,852
    
    
    $
    424,760
    
    
    $
    (3,905
    )
    
    $
    3,813Intersegment revenue
    
    
    
    
    
    
    640
    
    
    
    
    
    
    
    
    
    
    
    (640
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    54,731
    
    
    
    21,193
    
    
    
    2,077
    
    
    
    3,366
    
    
    
    (8,759
    )
    
    
    72,608
    
    
    
    72,100
    
    
    
    (508
    )
    
    
    Identifiable assets
    
    
    449,752
    
    
    
    267,709
    
    
    
    59,796
    
    
    
    5,351
    
    
    
    26,322
    
    
    
    808,930
    
    
    
    805,001
    
    
    
    (3,929
    )
    
    
    Capital expenditures
    
    
    60,276
    
    
    
    24,295
    
    
    
    3,640
    
    
    
    720
    
    
    
    59
    
    
    
    88,990
    
    
    
    88,013
    
    
    
    (977
    )
    
    
    
 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)Nine
Months Ended
September 30, 2005Revenue from external
customers
    
    $
    284,063
    
    
    $
    164,170
    
    
    $
    32,605
    
    
    $
    11,086
    
    
    $
    
    
    
    $
    491,924
    
    
    $
    491,904
    
    
    $
    (1,769
    )
    
    $
    1,749Intersegment revenue
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    77,153
    
    
    
    22,861
    
    
    
    (77
    )
    
    
    2,967
    
    
    
    (13,286
    )
    
    
    89,618
    
    
    
    89,525
    
    
    
    (93
    )
    
    
    Identifiable assets
    
    
    473,149
    
    
    
    295,295
    
    
    
    61,762
    
    
    
    3,724
    
    
    
    33,909
    
    
    
    867,839
    
    
    
    864,879
    
    
    
    (2,960
    )
    
    
    Capital expenditures
    
    
    50,509
    
    
    
    19,303
    
    
    
    5,991
    
    
    
    259
    
    
    
    124
    
    
    
    76,186
    
    
    
    75,958
    
    
    
    (228
    )
    
    
    
  Geographic Data
   15




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##### 



GOLDEN TELECOM, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Corporate,OtherCountriesAnd
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Three Months Ended
September 30, 2004Revenue
    
    $
    135,506
    
    
    $
    17,367
    
    
    $
    (160
    )
    
    $
    152,713Long-lived assets
    
    
    555,292
    
    
    
    27,422
    
    
    
    10,340
    
    
    
    593,054
 Corporate,OtherCountriesAnd
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Three Months Ended
September 30, 2005Revenue
    
    $
    151,334
    
    
    $
    18,324
    
    
    $
    272
    
    
    $
    169,930Long-lived assets
    
    
    578,583
    
    
    
    34,800
    
    
    
    11,847
    
    
    
    625,230
 Corporate,OtherCountriesAnd
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Nine Months Ended September 30, 2004Revenue
    
    $
    380,236
    
    
    $
    46,252
    
    
    $
    (1,728
    )
    
    $
    424,760Long-lived assets
    
    
    555,292
    
    
    
    27,422
    
    
    
    10,340
    
    
    
    593,054
 Corporate,OtherCountriesAnd
    
    ConsolidatedRussia
    
    Ukraine
    
    Eliminations
    
    Results(in thousands)Nine Months Ended September 30, 2005Revenue
    
    $
    437,748
    
    
    $
    54,910
    
    
    $
    (754
    )
    
    $
    491,904Long-lived assets
    
    
    578,583
    
    
    
    34,800
    
    
    
    11,847
    
    
    
    625,230
 Note 8: Subsequent Events
   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 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.
    17




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##### 



Recent Acquisitions
      Other Developments
     18




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##### 



Highlights and Outlook
      19




---



##### 



Critical Accounting Policies
  Revenue
recognition policies
 Allowance for doubtful accounts policies
 20




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##### 



Long-lived asset recovery policies;
 Goodwill and assessment of impairment;
 Valuation allowance for deferred tax asset;
 Business segment information;
 Functional currency;
 Critical Accounting Estimates
  Allowance for doubtful accounts;
 Tax provisions;
 21




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##### 



Useful lives of property and equipment and certain intangible assets;
 Business combinations;
 Recent Accounting Pronouncements
     22




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##### 



Results of Operations
    
    
    Consolidated Results.Consolidated Results of Operations for the Three
Months Ended September 30, 2005 compared to the Consolidated Results
of Operations for the Three Months Ended September 30, 2004
    
    Consolidated Results.Consolidated Results of Operations for the Nine
Months Ended September 30, 2005 compared to the Consolidated Results
of Operations for the Nine Months Ended September 30, 2004
    
    Consolidated Financial Position.Consolidated Financial Position at
September 30, 2005 compared to Consolidated Financial Position at
December 31, 2004
 Consolidated Results  Consolidated Results of Operations for the Three Months Ended September 30,
2005 Compared to the Consolidated Results of Operations for the Three Months Ended September 30,
2004
 Revenue
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Three Months
    
    
    For the Three MonthsEnded September 30,
    
    
    Ended September 30,2004
    
    
    2005(in millions)REVENUEBusiness and Corporate Services
    
    $
    84.6
    
    
    $
    99.5Carrier and Operator Services
    
    
    53.4
    
    
    
    56.7Consumer Internet Services
    
    
    10.9
    
    
    
    10.1Mobile Services
    
    
    4.2
    
    
    
    3.6Eliminations
    
    
    (0.3
    )
    
    
    TOTAL REVENUE
    
    $
    152.8
    
    
    $
    169.9
 Business and Corporate Services.
 23




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##### 



Carrier and Operator Services.
  Consumer Internet Services.
 Mobile Services.
 Expenses
  Consolidated Expenses
    
    
    Consolidated ExpensesFor the Three Months Ended
    
    
    For the Three Months EndedSeptember 30, 2004
    
    
    September 30, 2005(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    35.6
    
    
    $
    42.5Carrier and Operator Services
    
    
    34.7
    
    
    
    37.1Consumer Internet Services
    
    
    6.5
    
    
    
    7.1Mobile Services
    
    
    1.5
    
    
    
    1.6Eliminations
    
    
    (0.3
    )
    
    
    TOTAL COST OF REVENUE
    
    
    78.0
    
    
    
    88.3Selling, general and
administrative
    
    
    29.5
    
    
    
    31.0Depreciation and amortization
    
    
    19.5
    
    
    
    20.6Equity in earnings of ventures
    
    
    (0.1
    )
    
    
    (0.7
    )Interest income
    
    
    (0.2
    )
    
    
    (0.8
    )
 24




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##### 



Consolidated Expenses
    
    
    Consolidated ExpensesFor the Three Months Ended
    
    
    For the Three Months EndedSeptember 30, 2004
    
    
    September 30, 2005(in millions)Interest expense
    
    
    0.2
    
    
    
    0.1Foreign currency loss
    
    
    0.5
    
    
    
    0.2Minority interest
    
    
    0.3
    
    
    
    0.8Provision for income taxes
    
    $
    9.0
    
    
    $
    12.0
 Cost of Revenue
  Business and Corporate Services.
  Carrier and Operator Services.
  Consumer Internet Services.
 Mobile Services.
 Selling, General and Administrative
  Depreciation and Amortization
 25




---



##### 



Equity in Earnings of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Loss
  Minority Interest
  Provision for Income Taxes
  Net Income and Net Income per Share
   26




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##### 



Consolidated Results  Consolidated Results of Operations for the Nine Months Ended September 30,
2005 Compared to the Consolidated Results of Operations for the Nine
Months Ended September 30,
2004
 Revenue
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Nine Months
    
    
    For the Nine MonthsEnded September 30, 2004
    
    
    Ended September 30, 2005(in millions)REVENUEBusiness and Corporate Services
    
    $
    236.4
    
    
    $
    284.0Carrier and Operator Services
    
    
    143.8
    
    
    
    164.2Consumer Internet Services
    
    
    33.4
    
    
    
    32.6Mobile Services
    
    
    11.8
    
    
    
    11.1Eliminations
    
    
    (0.6
    )
    
    
    TOTAL REVENUE
    
    $
    424.8
    
    
    $
    491.9
 Business and Corporate Services.
  Carrier and Operator Services.
  27




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##### 



Consumer Internet Services.
 Mobile Services.
 Expenses
  Consolidated Expenses
    
    
    Consolidated ExpensesFor the Nine Months Ended
    
    
    For the Nine Months EndedSeptember 30, 2004
    
    
    September 30, 2005(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    100.5
    
    
    $
    121.4Carrier and Operator Services
    
    
    92.4
    
    
    
    106.5Consumer Internet Services
    
    
    19.7
    
    
    
    21.7Mobile Services
    
    
    4.5
    
    
    
    4.9Eliminations
    
    
    (0.6
    )
    
    
    TOTAL COST OF REVENUE
    
    
    216.5
    
    
    
    254.5Selling, general and
administrative
    
    
    81.0
    
    
    
    87.4Depreciation and amortization
    
    
    55.2
    
    
    
    60.5Equity in earnings of ventures
    
    
    (0.3
    )
    
    
    (0.5
    )Interest income
    
    
    (0.8
    )
    
    
    (1.7
    )Interest expense
    
    
    0.5
    
    
    
    0.5Foreign currency loss
    
    
    0.7
    
    
    
    0.4Minority interest
    
    
    0.8
    
    
    
    2.1Provision for income taxes
    
    $
    23.5
    
    
    $
    30.5
 Cost of Revenue
  Business and Corporate Services.
 28




---



##### 



Carrier and Operator Services.
  Consumer Internet Services.
 Mobile Services.
 Selling, General and Administrative
  Depreciation and Amortization
  Equity in Earnings of Ventures
 29




---



##### 



Interest Income
  Interest Expense
  Foreign Currency Loss
  Minority Interest
  Provision for Income Taxes
  Net Income and Net Income per Share
    30




---



##### 



Consolidated Financial Position  Significant Changes in Consolidated Financial Position at
September 30, 2005, compared to Consolidated Financial Position at December 31, 2004
 Accounts Receivable
  Intangible Assets
  Other Non-current Liabilities
  Minority Interest
  Stockholders Equity
  Income Taxes
  Liquidity and Capital Resources
 31




---



##### 



32




---



##### 



Contractual Obligations
  33




---



##### 



Special Note Regarding Forward Looking Statements
     34




---



##### 



ITEM 3. Quantitative and Qualitative disclosures About Market Risk
  ITEM 4. Controls and Procedures
  ITEM 5. Other Information
  35




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##### 



PART II. OTHER INFORMATION
 ITEM 6. Exhibits
 Designation
    
    Description10.1
    
    Employment Agreement dated as of July 19, 2005 by and between the Company and Jean-Pierre Vandromme is
incorporated herein by reference to Exhibit 99.2 to the Companys Current Report on Form 8-K dated July 21,
200510.2
    
    Separation Agreement dated as of September 15, 2005 by and between the Company and Michal Cupa is
incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on From 8-K dated
September 21, 200510.3
    
    Amendment No. 1 dated as of October 24, 2005 by and between the Company and Alexander Vinogradov is
incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated October
24, 200531.1
    
    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




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##### 



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)
  37




---



##### 



Exhibit Index
 Designation
    
    Description10.1
    
    Employment Agreement dated as of July 19, 2005 by and between the Company and Jean-Pierre Vandromme is
incorporated herein by reference to Exhibit 99.2 to the Companys Current Report on Form 8-K dated July 21,
200510.2
    
    Separation Agreement dated as of September 15, 2005 by and between the Company and Michal Cupa is
incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on From 8-K dated
September 21, 200510.3
    
    Amendment No. 1 dated as of October 24, 2005 by and between the Company and Alexander Vinogradov is
incorporated herein by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated October
24, 200531.1
    
    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