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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 June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-27423
 
 Golden Telecom, Inc.
  DELAWARE
(State or other jurisdiction of 
incorporation or organization)
    
    51-0391303
(I.R.S. Employer
Identification No.)
 Representative Office Golden TeleServices, Inc. 
1 Kozhevnichesky Proezd 
Moscow, Russia
(Address of principal executive office)
    
    115114
(Zip Code)
 (011-7-495) 797-9300
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TABLE OF CONTENTS
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1
    
    Financial Statements (Unaudited)
    
    
    3Condensed Consolidated Balance Sheets as of December 31, 2006 and June 30, 2007 (Unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2006 and 2007 (Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2007 (Unaudited)
    
    
    6Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    7Item 2
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations *
    
    
    23Item 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    46Item 4
    
    Controls and Procedures
    
    
    46PART II.
    
    OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    47Item 1A
    
    Risk Factors
    
    
    47Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 3
    
    Defaults Upon Senior Securities
    
    
    47Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    48Item 5
    
    Other information
    
    
    48Item 6
    
    Exhibits
    
    
    48Signatures
    
    
    49
 *
    
    Please refer to the special note regarding forward-looking statements in this section.
 2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 GOLDEN TELECOM, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
 December 31,
    
    
    June 30,2006
    
    
    2007ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    18,413
    
    
    $
    96,124Cash held in escrow
    
    
    
    
    
    
    10,000Accounts receivable, net of allowance for doubtful accounts of
$25,224 and $30,054 at December 31, 2006 and June 30, 2007, respectively
    
    
    147,719
    
    
    
    198,829VAT receivable
    
    
    21,486
    
    
    
    34,220Prepaid expenses
    
    
    11,371
    
    
    
    12,528Taxes receivable, excluding VAT
    
    
    6,466
    
    
    
    9,000Notes receivable
    
    
    379
    
    
    
    1,715Deferred tax asset
    
    
    11,098
    
    
    
    14,467Inventory
    
    
    7,682
    
    
    
    10,262Due from affiliates and related parties
    
    
    1,227
    
    
    
    2,806Restricted cash
    
    
    
    
    
    
    235Other current assets
    
    
    5,564
    
    
    
    7,714TOTAL CURRENT ASSETS
    
    
    231,405
    
    
    
    397,900Property and equipment, net of accumulated depreciation of $352,765
and $409,661 at December 31, 2006 and June 30, 2007, respectively
    
    
    552,341
    
    
    
    799,530Goodwill and intangible assets:Goodwill
    
    
    180,539
    
    
    
    290,219Intangible assets, net of accumulated amortization of $90,314 and $103,702 at
December 31, 2006 and June 30, 2007, respectively
    
    
    116,545
    
    
    
    236,993Net goodwill and intangible assets
    
    
    297,084
    
    
    
    527,212Investments in and advances to ventures
    
    
    11,886
    
    
    
    12,152Notes receivable
    
    
    2,500
    
    
    
    20,973Restricted cash
    
    
    233
    
    
    
    Other non-current assets
    
    
    11,741
    
    
    
    15,779TOTAL ASSETS
    
    $
    1,107,190
    
    
    $
    1,773,546
  3




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GOLDEN TELECOM, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
 December 31,
    
    
    June 30,2006
    
    
    2007LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    146,058
    
    
    $
    257,530VAT payable
    
    
    2,725
    
    
    
    13,412Debt maturing within one year
    
    
    12,305
    
    
    
    11,728Current capital lease obligation
    
    
    753
    
    
    
    5,072Deferred revenue
    
    
    21,634
    
    
    
    25,104Due to affiliates and related parties
    
    
    4,505
    
    
    
    5,533Liability
for acquisition
    
    
    378
    
    
    
    8,205Other current liabilities
    
    
    233
    
    
    
    193TOTAL CURRENT LIABILITIES
    
    
    188,591
    
    
    
    326,777Long-term debt, less current portion
    
    
    29
    
    
    
    225,149Long-term deferred tax liability
    
    
    29,268
    
    
    
    72,339Long-term deferred revenue
    
    
    36,951
    
    
    
    44,847Long-term capital lease obligations
    
    
    1,591
    
    
    
    9,496Other non-current liabilities
    
    
    2,321
    
    
    
    2,510TOTAL LIABILITIES
    
    
    258,751
    
    
    
    681,118Minority interest
    
    
    31,263
    
    
    
    72,208SHAREHOLDERS EQUITYPreferred stock, $0.01 par value (10,000,000 shares
authorized; none issued and outstanding at December 31, 2006
and June 30, 2007)
    
    
    
    
    
    
    Common stock, $0.01 par value (100,000,000 shares authorized;
36,673,015 and 39,915,234 shares issued and outstanding at December 31,
2006 and June 30, 2007, respectively)
    
    
    367
    
    
    
    399Additional paid-in capital
    
    
    674,993
    
    
    
    822,124Retained earnings
    
    
    66,744
    
    
    
    107,238Accumulated other comprehensive income
    
    
    75,072
    
    
    
    90,459TOTAL SHAREHOLDERS EQUITY
    
    
    817,176
    
    
    
    1,020,220TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,107,190
    
    
    $
    1,773,546
  4




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GOLDEN TELECOM, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007REVENUE:Telecommunication services
    
    $
    195,242
    
    
    $
    295,263
    
    
    $
    371,889
    
    
    $
    548,460Revenue from affiliates and related parties
    
    
    1,726
    
    
    
    2,406
    
    
    
    3,219
    
    
    
    4,948TOTAL REVENUE
    
    
    196,968
    
    
    
    297,669
    
    
    
    375,108
    
    
    
    553,408OPERATING COSTS AND EXPENSES:Access and network services (excluding depreciation
and amortization)
    
    
    105,608
    
    
    
    171,633
    
    
    
    199,001
    
    
    
    321,728Selling, general and administrative (excluding
depreciation and amortization)
    
    
    33,569
    
    
    
    44,797
    
    
    
    67,450
    
    
    
    93,783Depreciation and amortization
    
    
    23,923
    
    
    
    32,413
    
    
    
    46,572
    
    
    
    60,970TOTAL OPERATING COSTS AND EXPENSES
    
    
    163,100
    
    
    
    248,843
    
    
    
    313,023
    
    
    
    476,481INCOME FROM OPERATIONS
    
    
    33,868
    
    
    
    48,826
    
    
    
    62,085
    
    
    
    76,927OTHER INCOME (EXPENSE):Equity in earnings (losses) of ventures
    
    
    347
    
    
    
    107
    
    
    
    671
    
    
    
    (268
    )Interest income
    
    
    156
    
    
    
    1,160
    
    
    
    803
    
    
    
    1,428Interest expense
    
    
    (74
    )
    
    
    (3,065
    )
    
    
    (150
    )
    
    
    (3,065
    )Foreign currency gains (losses)
    
    
    669
    
    
    
    1,326
    
    
    
    1,575
    
    
    
    1,593TOTAL OTHER INCOME (EXPENSE)
    
    
    1,098
    
    
    
    (472
    )
    
    
    2,899
    
    
    
    (312)Income before income taxes and minority interest
    
    
    34,966
    
    
    
    48,354
    
    
    
    64,984
    
    
    
    76,615Income taxes
    
    
    11,356
    
    
    
    14,706
    
    
    
    20,770
    
    
    
    24,836Minority interest
    
    
    965
    
    
    
    1,385
    
    
    
    2,103
    
    
    
    2,797Income before cumulative effect of a change in
accounting principle
    
    
    22,645
    
    
    
    32,263
    
    
    
    42,111
    
    
    
    48,982Cumulative effect of a change in accounting principle,
net of tax of $52
    
    
    
    
    
    
    
    
    
    
    681
    
    
    
    NET INCOME
    
    $
    22,645
    
    
    $
    32,263
    
    
    $
    41,430
    
    
    $
    48,982Basic earnings per share of common stock:Income before cumulative effect of a change in
accounting principle
    
    
    0.62
    
    
    
    0.85
    
    
    
    1.15
    
    
    
    1.31Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    0.02
    
    
    
    Net income per share  basic
    
    $
    0.62
    
    
    $
    0.85
    
    
    $
    1.13
    
    
    $
    1.31Weighted average common shares  basic
    
    
    36,600
    
    
    
    37,872
    
    
    
    36,537
    
    
    
    37,277Diluted earnings per share of common stock:Income before cumulative effect of a change in
accounting principle
    
    $
    0.62
    
    
    $
    0.85
    
    
    
    1.15
    
    
    
    1.31Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    0.02
    
    
    
    Net income per share  diluted
    
    $
    0.62
    
    
    $
    0.85
    
    
    $
    1.13
    
    
    $
    1.31Weighted average common shares  diluted
    
    
    36,716
    
    
    
    37,983
    
    
    
    36,687
    
    
    
    37,400Cash dividends per common share
    
    $
    0.20
    
    
    $
    
    
    
    $
    0.40
    
    
    $
    
  5




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GOLDEN TELECOM, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 Six Months EndedJune 30,2006
    
    
    2007OPERATING ACTIVITIES:Net income
    
    $
    41,430
    
    
    $
    48,982Adjustments to Reconcile Net Income to Net Cash Provided byOperating Activities:Depreciation
    
    
    36,545
    
    
    
    49,395Amortization
    
    
    10,027
    
    
    
    11,575Equity in (earnings) losses of ventures
    
    
    (671
    )
    
    
    268Foreign currency gain
    
    
    (1,575
    )
    
    
    (1,593
    )Bad debt expense
    
    
    4,555
    
    
    
    3,394Stock based compensation expense
    
    
    2,273
    
    
    
    11,223Cumulative effect of a change in accounting principle, net
of tax of $52
    
    
    681
    
    
    
    Other
    
    
    452
    
    
    
    534Changes in assets and liabilities:Accounts receivable
    
    
    (27,855
    )
    
    
    (36,659
    )Accounts payable and accrued expenses
    
    
    22,916
    
    
    
    19,505VAT, net
    
    
    (6,552
    )
    
    
    (925
    )Other changes in assets and liabilities
    
    
    (1,055
    )
    
    
    3,978NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    81,171
    
    
    
    109,677INVESTING ACTIVITIES:Purchases of property and equipment and intangible assets
    
    
    (81,206
    )
    
    
    (110,162
    )Acquisitions, net of cash acquired
    
    
    (16,486
    )
    
    
    (106,066
    )Restricted cash
    
    
    337
    
    
    
    (2
    )Cash held in
escrow
    
    
    
    
    
    
    (10,000
    )Loans made
    
    
    (3,000
    )
    
    
    (19,815
    )Other investing
    
    
    1,206
    
    
    
    596NET CASH USED IN INVESTING ACTIVITIES
    
    
    (99,149
    )
    
    
    (245,449
    )FINANCING ACTIVITIES:Net proceeds from exercise of employee stock options
    
    
    2,306
    
    
    
    756Cash dividends paid
    
    
    (14,622
    )
    
    
    Proceeds from debt
    
    
    
    
    
    
    281,706Repayment of debt
    
    
    
    
    
    
    (69,203
    )Other financing
    
    
    (1,062
    )
    
    
    (697
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    (13,378
    )
    
    
    212,562Effect of exchange rate changes on cash and cash equivalents
    
    
    591
    
    
    
    921Net increase (decrease) in cash and cash equivalents
    
    
    (30,765
    )
    
    
    77,711Cash and cash equivalents at beginning of period
    
    
    67,176
    
    
    
    18,413CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    36,411
    
    
    $
    96,124
  6




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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
  Accounting from Uncertainty in Income Taxes
 Accounting for Uncertainty in Income Taxes 
an interpretation of SFAS No. 109
  (in thousands)Balance at January 1, 2007
    
    $
    8,555Additions based on tax positions related to the
current year (including
additions related to the acquisition of ZAO
Cortec in May 2007 of $10,221)
    
    
    10,457Additions of tax positions of prior years
    
    
    1,044Reductions of tax positions of prior years
    
    
    Settlements
    
    
    Balance at June 30, 2007
    
    $
    20,056
  7




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
    Income Taxes
 Accounting for Income Taxes. Interim Financial Reporting,
 Comparative Figures
  Recent Accounting Pronouncements
 Income Statement Presentation of Taxes Collected from Customers and Remitted to Government
Authorities
 How Taxes Collected from Customers and Remitted to Governmental
Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation).
 8




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Fair Value Measurements
 Fair Value Measurements
 Fair Value Option
 The Fair Value Option for Financial Assets
and Financials Liabilities  Including an Amendment of FASB Statement No. 115
 Note 3: Comprehensive Income
 Reporting Comprehensive Income Foreign Currency Translation
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(in thousands)Net income
    
    $
    22,645
    
    
    $
    32,263
    
    
    $
    41,430
    
    
    $
    48,982Foreign currency translation adjustment
    
    
    
    
    
    
    7,493
    
    
    
    
    
    
    
    15,387Comprehensive income
    
    $
    22,645
    
    
    $
    39,756
    
    
    $
    41,430
    
    
    $
    64,369
 Note 4: Intangible Assets
  As of December 31, 2006
    
    
    As of June 30, 2007(in thousands)Weighted Average
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    AccumulatedAmortization Lives
    
    
    Cost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationIntangible assets:Telecommunications service contracts
    
    10 years
    
    $
    119,433
    
    
    $
    (49,450
    )
    
    $
    132,215
    
    
    $
    (54,163
    )Contract-based customer relationships
    
    5 years
    
    
    42,104
    
    
    
    (28,578
    )
    
    
    51,263
    
    
    
    (33,878
    )Licenses
    
    10 years
    
    
    26,948
    
    
    
    (4,295
    )
    
    
    102,083
    
    
    
    (4,469
    )Brand name
    
    10 years
    
    
    
    
    
    
    
    
    
    
    32,800
    
    
    
    (2,269
    )Other intangible assets
    
    6 years
    
    
    18,374
    
    
    
    (7,991
    )
    
    
    22,334
    
    
    
    (8,923
    )Total
    
    
    
    
    
    $
    206,859
    
    
    $
    (90,314
    )
    
    $
    340,695
    
    
    $
    (103,702
    )
  9




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note 5: Net Income Per Share
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(in thousands, except per share data)Income before cumulative effect of a change in
accounting principle
    
    $
    22,645
    
    
    $
    32,263
    
    
    $
    42,111
    
    
    $
    48,982Weighted average outstanding of:Common stock shares
    
    
    36,600
    
    
    
    37,872
    
    
    
    36,537
    
    
    
    37,277Dilutive effect of:Employee stock options
    
    
    116
    
    
    
    111
    
    
    
    150
    
    
    
    123Common stock and common stock equivalents
    
    
    36,716
    
    
    
    37,983
    
    
    
    36,687
    
    
    
    37,400Net income per share before cumulative effect of a change
in accounting principle:Basic
    
    $
    0.62
    
    
    $
    0.85
    
    
    $
    1.15
    
    
    $
    1.31Diluted
    
    $
    0.62
    
    
    $
    0.85
    
    
    $
    1.15
    
    
    $
    1.31
 Note 6: Business Combinations and Investment Transactions
   10




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Business Combinations Goodwill and Other
Intangible Assets
   Business Combinations
 11




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 May 31, 2007(in thousands)ASSETS:Current assets
    
    $
    31,743Property and equipment
    
    
    150,327Intangible assets
    
    
    51,591Goodwill
    
    
    103,698Other assets
    
    
    23Total assets
    
    $
    337,382LIABILITES:Current liabilities
    
    $
    94,100Non-current liabilities
    
    
    25,307Net assets
    
    $
    217,975Less: Minority interest in net assets acquired
    
    
    (21,194
    )Total purchase consideration and transaction costs
    
    $
    196,781Consideration and transaction costs:GTI shares consideration
    
    
    142,130Cash consideration
    
    
    8,205Loan refinancing
    
    
    45,000Direct transaction costs
    
    
    1,446Total purchase consideration and transaction costs
    
    $
    196,781
   12




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(unaudited)(in thousands, except per share data)Revenue
    
    $
    217,059
    
    
    $
    320,363
    
    
    $
    414,166
    
    
    $
    604,968Income before cumulative effect of
a change in accounting principle
    
    
    22,395
    
    
    
    33,654
    
    
    
    41,840
    
    
    
    50,320Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    (681
    )
    
    
    Net income
    
    $
    22,395
    
    
    $
    33,654
    
    
    $
    41,159
    
    
    $
    50,320Basic earnings per share of common stock:Income before cumulative effect of
a change in accounting principle
    
    $
    0.56
    
    
    $
    0.82
    
    
    $
    1.05
    
    
    $
    1.24Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    0.02
    
    
    
    Net income per share  basicWeighted average common shares  basic
    
    $
    0.56
    
    
    $
    0.82
    
    
    $
    1.03
    
    
    $
    1.24Diluted earnings per share of common stock:Income before cumulative effect of
a change in accounting principle
    
    $
    0.56
    
    
    $
    0.82
    
    
    $
    1.05
    
    
    $
    1.24Cumulative effect of a change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    0.02
    
    
    
    Net income per share  diluted
    
    $
    0.56
    
    
    $
    0.82
    
    
    $
    1.03
    
    
    $
    1.24
  Business Combinations Goodwill and Other Intangible
Assets
  Note 7: Shareholders Equity
 Common Stock
  13




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GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   Note 8: Stock Option and Stock Appreciation Rights Plans
    
 14




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##### 



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  WeightedAverageExercise
    
    
    AggregateSARs
    
    
    Price
    
    
    Intrinsic Value(in thousands)Outstanding at January 1,
2006
    
    
    1,251,800
    
    
    $
    29.19SARs granted
    
    
    60,000
    
    
    
    31.46SARs exercised
    
    
    
    
    
    
    SARs expired
    
    
    
    
    
    
    SARs forfeited
    
    
    (42,400
    )
    
    
    28.95Outstanding at June 30,
2006
    
    
    1,269,400
    
    
    
    29.30
    
    
    $
    Exercisable at June 30,
2006
    
    
    
    
    
    $
    
    
    
    $
    
 WeightedAverageExercise
    
    
    AggregateSARs
    
    
    Price
    
    
    Intrinsic Value(in thousands)Outstanding at January 1,
2007
    
    
    1,293,800
    
    
    $
    29.05SARs granted
    
    
    
    
    
    
    SARs exercised
    
    
    (648,117
    )
    
    
    28.43SARs expired
    
    
    
    
    
    
    SARs forfeited
    
    
    (33,900
    )
    
    
    29.88Outstanding at June 30,
2007
    
    
    611,783
    
    
    
    29.67
    
    
    $
    15,500Exercisable at June 30,
2007
    
    
    21,100
    
    
    $
    26.19
    
    
    $
    608
   WeightedAverageExercise
    
    
    AggregateStock options
    
    
    Price
    
    
    Intrinsic Value(in thousands)Outstanding at January 1,
2006
    
    
    373,012
    
    
    $
    14.31Stock options granted
    
    
    
    
    
    
    Stock options exercised
    
    
    (167,358
    )
    
    
    13.81Stock options expired
    
    
    
    
    
    
    Stock options forfeited
    
    
    
    
    
    
    Outstanding at June 30,
2006
    
    
    205,654
    
    
    
    14.71
    
    
    $
    2,272Exercisable at June 30,
2006
    
    
    205,654
    
    
    $
    14.71
    
    
    $
    2,272
 15




---



##### 



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 WeightedAverageExercise
    
    
    AggregateStock options
    
    
    Price
    
    
    Intrinsic Value(in thousands)Outstanding at January 1,
2007
    
    
    157,915
    
    
    $
    13.82Stock options granted
    
    
    1,456,020
    
    
    
    55.58Stock options exercised
    
    
    (49,000
    )
    
    
    15.07Stock options expired
    
    
    
    
    
    
    Stock options forfeited
    
    
    
    
    
    
    Outstanding at June 30,
2007
    
    
    1,564,935
    
    
    
    55.34
    
    
    $
    5,574Exercisable at June 30,
2007
    
    
    367,382
    
    
    $
    41.78
    
    
    $
    4,860
  16




---



##### 



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note 9: Commitments and Contingencies
 Tax Matters
    Taxes Other Than Income Tax
  Russian Environment and Current Economic Situation
   17




---



##### 



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Net Assets Position in Accordance with Statutory Requirements
   Other Commitments and Contingencies
     Other Matters
  18




---



##### 



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
     Note 10: Investments in and Advances to Ventures
   As of December 31, 2006
    
    
    As of June 30, 2007(in thousands)Equity in net assets acquired
    
    $
    13,448
    
    
    $
    13,022Goodwill as part of investment
    
    
    1,313
    
    
    
    1,313Difference between fair value and historical value of
assets acquired
    
    
    (1,355
    )
    
    
    (1,485
    )Cash advances and other
    
    
    (1,520
    )
    
    
    (698
    )Total investments in and advances to ventures
    
    $
    11,886
    
    
    $
    12,152
  19




---



##### 



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Note 11: Segment Information
 Line of Business Data
 Disclosures
about Segments of an Enterprise and Related Information
 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 EndedJune 30, 2006Revenue from external
customers
    
    $
    113,073
    
    
    $
    71,398
    
    
    $
    12,243
    
    
    $
    2,621
    
    
    $
    
    
    
    $
    199,335
    
    
    $
    196,968
    
    
    $
    (4,210
    )
    
    $
    1,843Intersegment revenue
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    30,787
    
    
    
    7,399
    
    
    
    667
    
    
    
    501
    
    
    
    (4,468
    )
    
    
    34,886
    
    
    
    33,868
    
    
    
    (1,018
    )
    
    
    Identifiable assets
    
    
    520,706
    
    
    
    364,875
    
    
    
    73,136
    
    
    
    9,145
    
    
    
    (2.968
    )
    
    
    964,894
    
    
    
    935,924
    
    
    
    (28,970
    )
    
    
    Capital expenditures
    
    
    22,318
    
    
    
    9,365
    
    
    
    5,067
    
    
    
    5,614
    
    
    
    24
    
    
    
    42,388
    
    
    
    41,873
    
    
    
    (515
    )
    
    
    
 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 EndedJune 30, 2007Revenue from external
customers
    
    $
    167,466
    
    
    $
    116,883
    
    
    $
    13,445
    
    
    $
    3,666
    
    
    $
    
    
    
    $
    301,460
    
    
    $
    297,669
    
    
    $
    (5,602
    )
    
    $
    1,811Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    47,578
    
    
    
    12,790
    
    
    
    (4,528
    )
    
    
    (275
    )
    
    
    (5,971
    )
    
    
    49,594
    
    
    
    48,826
    
    
    
    (768
    )
    
    
    Identifiable assets
    
    
    809,745
    
    
    
    540,818
    
    
    
    357,770
    
    
    
    48,342
    
    
    
    53,959
    
    
    
    1,810,634
    
    
    
    1,773,546
    
    
    
    (37,088
    )
    
    
    Capital expenditures
    
    
    42,450
    
    
    
    14,883
    
    
    
    14,364
    
    
    
    2,950
    
    
    
    754
    
    
    
    75,401
    
    
    
    76,000
    
    
    
    599
    
    
    
    
 20




---



##### 



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)Six
Months EndedJune 30, 2006Revenue from external
customers
    
    $
    216,432
    
    
    $
    133,821
    
    
    $
    24,502
    
    
    $
    5,211
    
    
    $
    
    
    
    $
    379,966
    
    
    $
    375,108
    
    
    $
    (8,089
    )
    
    $
    3,231Intersegment revenue
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    57,016
    
    
    
    14,432
    
    
    
    304
    
    
    
    1,035
    
    
    
    (8,922
    )
    
    
    63,865
    
    
    
    62,085
    
    
    
    (1,780
    )
    
    
    Identifiable assets
    
    
    520,706
    
    
    
    364,875
    
    
    
    73,136
    
    
    
    9,145
    
    
    
    (2.968
    )
    
    
    964,894
    
    
    
    935,924
    
    
    
    (28,970
    )
    
    
    Capital expenditures
    
    
    43,123
    
    
    
    17,400
    
    
    
    7,962
    
    
    
    5,661
    
    
    
    29
    
    
    
    74,175
    
    
    
    73,460
    
    
    
    (715
    )
    
    
    
 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 EndedJune 30, 2007Revenue from external
customers
    
    $
    315,474
    
    
    $
    216,015
    
    
    $
    23,718
    
    
    $
    5,503
    
    
    $
    
    
    
    $
    560,710
    
    
    $
    553,408
    
    
    $
    (9,749
    )
    
    $
    2,447Intersegment revenue
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income (loss)
    
    
    81,023
    
    
    
    18,416
    
    
    
    (9,658
    )
    
    
    (656
    )
    
    
    (12,088
    )
    
    
    77,037
    
    
    
    76,927
    
    
    
    (110
    )
    
    
    Identifiable assets
    
    
    809,745
    
    
    
    540,818
    
    
    
    357,770
    
    
    
    48,342
    
    
    
    53,959
    
    
    
    1,810,634
    
    
    
    1,773,546
    
    
    
    (37,088
    )
    
    
    Capital expenditures
    
    
    72,091
    
    
    
    32,213
    
    
    
    21,511
    
    
    
    3,624
    
    
    
    760
    
    
    
    130,199
    
    
    
    124,390
    
    
    
    (5,809
    )
    
    
    
 Geographic Data
   Corporate,OtherCountries &
    
    
    ConsolidatedRussia
    
    
    Ukraine
    
    
    Eliminations
    
    
    Results(in thousands)Three months ended
June 30, 2006Revenue
    
    $
    175,430
    
    
    $
    19,359
    
    
    $
    2,179
    
    
    $
    196,968Long-lived assets
    
    
    654,249
    
    
    
    57,659
    
    
    
    12,736
    
    
    
    724,644
 Corporate,OtherCountries &
    
    
    ConsolidatedRussia
    
    
    Ukraine
    
    
    Eliminations
    
    
    Results(in thousands)Three months ended
June 30, 2007Revenue
    
    $
    272,939
    
    
    $
    25,188
    
    
    $
    (458
    )
    
    $
    297,669Long-lived assets
    
    
    1,243,696
    
    
    
    95,197
    
    
    
    36,753
    
    
    
    1,375,646
 21




---



##### 



GOLDEN TELECOM, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Corporate,OtherCountries &
    
    
    ConsolidatedRussia
    
    
    Ukraine
    
    
    Eliminations
    
    
    Results(in thousands)Six months ended June 30, 2006Revenue
    
    $
    334,480
    
    
    $
    37,054
    
    
    $
    3,574
    
    
    $
    375,108Long-lived assets
    
    
    654,249
    
    
    
    57,659
    
    
    
    12,736
    
    
    
    724,644
 Corporate,OtherCountries &
    
    
    ConsolidatedRussia
    
    
    Ukraine
    
    
    Eliminations
    
    
    Results(in thousands)Six months ended June 30, 2007Revenue
    
    $
    505,338
    
    
    $
    48,177
    
    
    $
    (107
    )
    
    $
    553,408Long-lived assets
    
    
    1,243,696
    
    
    
    95,197
    
    
    
    36,753
    
    
    
    1,375,646
 Note 12: Supplemental Cash Flow Information
  Six months ended June 30,2006
    
    
    2007(in thousands)Amounts payable in connection with
business acquisitions
    
    $
    378
    
    
    $
    8,205Capitalized leased assets
    
    
    
    
    
    
    11,477Issuance of
common stock in connection with an acquisition
    
    
    
    
    
    
    142,130
 Note 13: Subsequent Events
   22




---



##### 



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 Moscow, Kiev and Odessa we provide mobile
services with value-added features, such as voicemail, roaming and messaging services on a
subscription and prepaid basis.
     23




---



##### 



Recent Acquisitions
       24




---



##### 



Regulatory Developments
     25




---



##### 



Other Developments
   
  26




---



##### 



Highlights and Outlook
    27




---



##### 



28




---



##### 



29




---



##### 



Critical Accounting Policies
  Revenue recognition policies
 Allowance for doubtful accounts policies
 Long-lived asset recovery policies
 Goodwill and assessment of impairment Goodwill and Other Intangible Assets
 Valuation allowance for deferred tax asset
 Business segment information
 30




---



##### 



Functional currency Foreign
Currency Translation .
 Stock-based compensation;
 Critical Accounting Estimates
  Allowance for doubtful accounts;
 Tax provisions; Accounting for Contingencies Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109. Accounting for Income Taxes
 Useful lives of property and equipment and certain intangible assets;
 Business combinations; Business Combinations
 31




---



##### 



Results of Operations
   The discussion of our results of operations is organized as follows:
 
    
    Consolidated Results.Consolidated Results of Operations for the Three
Months Ended June 30, 2007, compared to the Consolidated Results of
Operations for the Three Months Ended June 30, 2006
    
    Consolidated Results.Consolidated Results of Operations for the Six
Months Ended June 30, 2007, compared to the Consolidated Results of
Operations for the Six Months Ended June 30, 2006
    
    Consolidated Financial Position.Consolidated Financial Position at
June 30, 2007, compared to Consolidated Financial Position at December
31, 2006
 Consolidated Results  Consolidated Results of Operations for the Three Months Ended June 30,
2007, Compared to the Consolidated Results of Operations for the Three Months Ended June 30, 2006
 Revenue
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Three Months
    
    
    For the Three MonthsEnded June 30, 2006
    
    
    Ended June 30, 2007(in millions)REVENUEBusiness and Corporate Services
    
    $
    113.0
    
    
    $
    167.2Carrier and Operator Services
    
    
    69.2
    
    
    
    113.3Consumer Internet Services
    
    
    12.2
    
    
    
    13.5Mobile Services
    
    
    2.6
    
    
    
    3.7TOTAL REVENUE
    
    $
    197.0
    
    
    $
    297.7
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Three Months
    
    
    For the Three MonthsEnded June 30, 2006
    
    
    Ended June 30, 2007(in millions)REVENUEMoscow
    
    $
    121.7
    
    
    $
    194.3Northwest region of Russia
    
    
    18.0
    
    
    
    26.8Other regions of Russia and CIS
    
    
    42.3
    
    
    
    64.2Ukraine
    
    
    19.4
    
    
    
    25.2Eliminations
    
    
    (4.4
    )
    
    
    (12.8
    )TOTAL REVENUE
    
    $
    197.0
    
    
    $
    297.7
 Business and Corporate Services.
 32




---



##### 



(in whole numbers)
    
    2006
    
    
    2007
    
    
    % ChangeBCS Moscow customer statistics on June 30:Total clients
    
    
    23,559
    
    
    
    23,799
    
    
    
    1
    %Business centers
    
    
    855
    
    
    
    1,002
    
    
    
    17
    %Trade centers
    
    
    78
    
    
    
    118
    
    
    
    51
    %Hotels
    
    
    51
    
    
    
    55
    
    
    
    8
    %Direct inward dialing lines
    
    
    131,250
    
    
    
    145,000
    
    
    
    10
    %Ethernet / Metropolitan Ethernet Network connections
    
    
    2,172
    
    
    
    2,865
    
    
    
    32
    %High speed Internet active contracts
    
    
    694
    
    
    
    1,378
    
    
    
    99
    %
    Carrier and Operator Services.
  33




---



##### 



Consumer Internet Services.
 Mobile Services.
 Expenses
  Consolidated Expenses
    
    
    Consolidated ExpensesFor the Three Months
    
    
    For the Three MonthsEnded June 30, 2006
    
    
    Ended June 30, 2007(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    48.0
    
    
    $
    75.2Carrier and Operator Services
    
    
    48.4
    
    
    
    83.1Consumer Internet Services
    
    
    7.9
    
    
    
    11.2Mobile Services
    
    
    1.3
    
    
    
    2.3Corporate
    
    
    
    
    
    
    (0.2
    )TOTAL COST OF REVENUE
    
    
    105.6
    
    
    
    171.6Selling, general and administrative
    
    
    33.5
    
    
    
    44.8Depreciation and amortization
    
    
    24.0
    
    
    
    32.4Equity in earnings of ventures
    
    
    (0.4
    )
    
    
    (0.1
    )Interest income
    
    
    (0.1
    )
    
    
    (1.2
    )Interest expense
    
    
    0.1
    
    
    
    3.1Foreign currency gain
    
    
    (0.7
    )
    
    
    (1.3
    )Minority interest
    
    
    1.0
    
    
    
    1.4Provision for income taxes
    
    
    11.4
    
    
    
    14.7
 34




---



##### 



Cost of Revenue
  Business and Corporate Services.
    Carrier and Operator Services.
    Consumer Internet Services.
 35




---



##### 



Mobile Services.
 Selling, General and Administrative
  Depreciation and Amortization
  Equity in Earnings of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Gain
  Minority Interest
  36




---



##### 



Provision for Income Taxes
  Net Income and Net Income per Share
    Consolidated Results  Consolidated Results of Operations for the Six Months Ended June 30, 2007,
compared to the Consolidated Results of Operations for the Six Months Ended June 30, 2006
 Revenue
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Six Months
    
    
    For the Six MonthsEnded June 30, 2006
    
    
    Ended June 30, 2007U(in millions)REVENUEBusiness and Corporate Services
    
    $
    216.2
    
    
    $
    315.0Carrier and Operator Services
    
    
    129.3
    
    
    
    209.1Consumer Internet Services
    
    
    24.4
    
    
    
    23.8Mobile Services
    
    
    5.2
    
    
    
    5.5TOTAL REVENUE
    
    $
    375.1
    
    
    $
    553.4
  Consolidated Revenue
    
    
    Consolidated RevenueFor the Six Months
    
    
    For the Six MonthsEnded June 30, 2006
    
    
    Ended June 30, 2007(in millions)REVENUEMoscow
    
    $
    233.8
    
    
    $
    353.5Northwest region of Russia
    
    
    34.5
    
    
    
    52.5Other regions of Russia and CIS
    
    
    80.6
    
    
    
    120.9Ukraine
    
    
    37.1
    
    
    
    48.2Eliminations
    
    
    (10.9
    )
    
    
    (21.7
    )TOTAL REVENUE
    
    $
    375.1
    
    
    $
    553.4
 Business and Corporate Services.
  37




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##### 



Carrier and Operator Services.
    Consumer Internet Services.
 Mobile Services.
 38




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##### 



Expenses
  Consolidated Expenses
    
    
    Consolidated ExpensesFor the Six Months
    
    
    For the Six MonthsEnded June 30, 2006
    
    
    Ended June 30, 2007(in millions)COST OF REVENUEBusiness and Corporate Services
    
    $
    92.0
    
    
    $
    142.4Carrier and Operator Services
    
    
    88.5
    
    
    
    154.7Consumer Internet Services
    
    
    16.0
    
    
    
    21.0Mobile Services
    
    
    2.5
    
    
    
    3.6TOTAL COST OF REVENUE
    
    
    199.0
    
    
    
    321.7Selling, general and administrative
    
    
    67.4
    
    
    
    93.8Depreciation and amortization
    
    
    46.6
    
    
    
    61.0Equity in (earnings)/ losses
of ventures
    
    
    (0.7
    )
    
    
    0.3Interest income
    
    
    (0.8
    )
    
    
    (1.4
    )Interest expense
    
    
    0.2
    
    
    
    3.1Foreign currency gain
    
    
    (1.6
    )
    
    
    (1.6
    )Minority interest
    
    
    2.1
    
    
    
    2.8Provision for income taxes
    
    
    20.8
    
    
    
    24.8Cumulative effect of a change in
accounting principle, net of tax
    
    $
    0.7
    
    
    $
    
 Cost of Revenue
  Business and Corporate Services.
    Carrier and Operator Services.
   39




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##### 



Consumer Internet Services.
  Mobile Services.
 Selling, General and Administrative
  Depreciation and Amortization
  Equity in Earnings (Losses) of Ventures
  Interest Income
  Interest Expense
  Foreign Currency Gain
  40




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##### 



Minority Interest
  Provision for Income Taxes
  Cumulative Effect of a Change in Accounting Principle
  Net Income and Net Income per Share
    Consolidated Financial Position  Significant Changes in Consolidated Financial Position at June
30, 2007, compared to Consolidated Financial Position at December 31, 2006
 Accounts Receivable
  Notes
Receivable
  Intangible Assets
  41




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##### 



Liability
for Acquisition
  Minority Interest
  Stockholders Equity
  Income Taxes
  Liquidity and Capital Resources
  Consolidated Cash Flows
    
    
    Consolidated Cash FlowsFor the Six Months
    
    
    For the Six MonthsEnded June 30, 2006
    
    
    Ended June 30, 2007(in millions)CASH FLOWSProvided by operating activities
    
    $
    81.2
    
    
    $
    109.7Used in investing activities
    
    
    (99.2
    )
    
    
    (245.4
    )(Used in) provided by financing
activities
    
    
    (13.4
    )
    
    
    212.5Effect of exchange rate changes
    
    
    0.6
    
    
    
    0.9Net (decrease) increase in cash
and cash equivalents
    
    $
    (30.8
    )
    
    $
    77.7
     42




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##### 



43




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##### 



Credit Rating Agency
    
    Rating
    
    OutlookStandard & Poors
    
    BB
    
    StableMoodys
    
    Ba3
    
    Stable
   Contractual Obligations
  Payments Due by Period (3)(4)(in thousands)Less
    
    
    1-3
    
    
    4-5Total
    
    
    than 1 year
    
    
    years
    
    
    years
    
    
    ThereafterLong-term debt
    
    $
    274,043
    
    
    $
    17,464
    
    
    $
    255,637
    
    
    $
    942
    
    
    $
    Capital lease obligations
    
    
    14,739
    
    
    
    5,127
    
    
    
    9,612
    
    
    
    
    
    
    
    Non-cancelable lease
obligations
    
    
    43,078
    
    
    
    12,702
    
    
    
    24,174
    
    
    
    5,491
    
    
    
    711Purchase obligations (1)
    
    
    95,155
    
    
    
    31,210
    
    
    
    38,864
    
    
    
    17,100
    
    
    
    7,981Other long-term liabilities (2)
    
    
    2,510
    
    
    
    
    
    
    
    2,510
    
    
    
    
    
    
    
    Total
    
    $
    429,525
    
    
    $
    66,503
    
    
    $
    330,797
    
    
    $
    23,533
    
    
    $
    8,692
 
 (1)
    
    Purchase obligations primarily include our contractual legal obligations for the future
purchase of equipment, interconnect, and satellite transponder capacity.(2)
    
    Other long-term liabilities primarily include obligations related to the SARs we have
granted.(3)
    
    Amounts include interest.(4)
    
    FIN No. 48 liabilities of $20.1 million are excluded from the Contractual Obligations
table because we are not able to make a reasonable reliable estimate of the period of cash
settlement with the respective taxing authority. 44




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##### 



Special Note Regarding Forward Looking Statements
     45




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##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of disclosure controls and procedures.
  
    
    Revenue recognition;
    
    Financial statement close process;
    
    Inventory and fixed asset management; and
    
    Lack of qualified US GAAP finance personnel.
    
    
    commenced a review of the revenue reporting, financial statement close and inventory
and fixed asset management practices followed at Corbina; and
    
    engaged independent consultants to assist management in identifying and resolving
issues.
  Changes in internal controls over financial reporting.
  46




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##### 



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Investing in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and all other information contained in this Quarterly
Report on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on March 16, 2007 before
purchasing our common stock. The risks and uncertainties described below are not the only ones
that we face. Additional risks and uncertainties of which we are unaware, or that we currently deem
immaterial, may also become important factors that affect us. Any of the following risks could
adversely affect our business, financial condition and results of operations. In such case, the
trading price of our common stock could decline, and you could lose some or all of your investment.
 Failure to install our transmitter on Ostankino television tower in Moscow could disrupt our
television and media business plans
  We may encounter difficulties in integrating Corbina into our operations and in further developing
the business
  Our significant shareholders may have other interests which conflict with our own interests
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  47




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##### 



Item 4. Submission of Matters to a Vote of Security Holders
  
 (1)
    
    The votes cast for each of the Companys ten nominees for election to the Companys Board
of Directors and the shareholder nominee were as follows: Nominee
    
    For
    
    
    WithheldPetr Aven
    
    
    28,874,506
    
    
    
    499,111Vladimir Bulgak
    
    
    28,971,026
    
    
    
    352,591Patrick Gallagher
    
    
    28,971,026
    
    
    
    352,591Thor Halvorsen
    
    
    28,874,336
    
    
    
    449,281David Herman
    
    
    28,874,506
    
    
    
    449,111Kjell Johnson
    
    
    28,874,506
    
    
    
    449,111Oleg Malis
    
    
    27,484,102
    
    
    
    1,839,515Alexey Reznikovich
    
    
    28,696,906
    
    
    
    626,711David Smyth
    
    
    24,946,959
    
    
    
    352,591Jean-Pierre Vandromme
    
    
    28,796,426
    
    
    
    527,191Andrey Gaiduk
    
    
    5,844,093
    
    
    
    23,454,005
 
 (2)
    
    Ratification of selection of Ernst & Young LLC as the Companys independent auditors for
2007  FOR 29,151,733 shares; AGAINST 2,279 shares; ABSTAIN 169,505 shares.(3)
    
    To approve amendment to the Companys 1999 Equity Participation Plan  FOR 28,802,465
shares; AGAINST 250,947 shares; ABSTAIN 170,205 shares. 
 Item 5. Other Information
  
 Item 6. Exhibits
 Designation
    
    Description31.1
    
    Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 48




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##### 



SIGNATURES
  GOLDEN TELECOM, INC.(Registrant)By:
    
    /s/ BORIS SVETLICHNYName:
    
    Boris SvetlichnyTitle:
    
    Senior Vice-President, Chief Financial Officer and Treasurer(Principal Financial Officer)By:
    
    /s/ MICHAEL D. WILSONName:
    
    Michael D. WilsonTitle:
    
    Vice-President and Corporate Controller(Principal Accounting Officer)
  49




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##### 



Designation
    
    Description31.1
    
    Certification of the Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.