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Golden Telecom Achieves Solid Growth And Profit

August 06, 2002. TAG: Telecommunications

Golden Telecom, Inc. (NASDAQ:"GLDN") continued its double digit revenue growth and outstanding EBITDA growth , achieving a 16% year over year growth in revenue and a 124% year over year growth in EBITDA in the second quarter of 2002. Importantly, these figures were reflected in an increase in year on year net cash flow provided by operating activities of 60% in the second quarter of 2002. Here are some of the highlights of Second Quarter 2002 vs. Second Quarter 2001: -- Consolidated revenue of $39.2 million -- up 16 percent. - Consolidated EBITDA1 of $11.4 million -- up 124 percent. -- Consolidated EBITDA1 margin increased from 15 percent to 29 percent. -- Consolidated net income was $2.8 million up from a net loss of $3.5 million. -- Consolidated Data and Internet revenue of $20.0 million -- up 40 percent. "Our solid second quarter results reaffirm the viability of our strategic course for this year and our continuing success in implementing our short-term and medium term priorities," said Alexander Vinogradov, President and CEO of Golden Telecom. "To a large extent we remain unaffected by the accounting scandals occurring in western financial markets. We continue to focus on the growing markets of Russia, Ukraine and other CIS countries and, operationally, are only marginally affected by the problems in the global telecommunications industry. We have strengthened our position as the leading voice and data operator in Moscow and as a leading telecommunications company in the CIS." "Second quarter revenue has resumed its seasonal growth trend, which is a satisfying result when considered in the context of global telecommunications markets. The company has only limited exposure, via access to international capacity and bi-lateral traffic exchange, to the difficulties facing telecommunications companies outside the markets we address. Despite lower revenues from our Ukrainian operations, we achieved 16 percent growth compared to the second quarter of 2001, again driven by an increase in data and Internet revenue." commented David Stewart, Golden Telecom's Chief Financial Officer, "Our EBITDA1 continued its significant year over year growth, however, sequential quarter over quarter growth was lower than the annual increase due to planned increases in costs for additional capacity." "Our quarterly net income was positive but it was adversely impacted by our share of the losses incurred by MCT Corp. As a result of MCT Corp.'s significant US GAAP losses in the second quarter, we wrote off our remaining investment in the company. Based on MCT Corp.'s historical results, we had previously assumed that we would have to recognize these losses prior to the end of 2002."added David Stewart. "We now expect to see a positive impact on our net income in the third quarter as a result of this earlier than anticipated write down." "Overall our balance sheet has become even stronger, we repaid$7.2 million of debt in the second quarter of 2002, yet our cash, cash equivalents and investments held for sale position increased from$52.2 million to $53.7 million. We now have only $4.4 million of debt, excluding capital leases, on our balance sheet, although this amount will increase when we draw down all or a portion of a US $30 million credit facility after closing the Sovintel transaction." "We continue to develop our businesses in the Russian regions, deploying the latest technological innovations in our service offerings. We plan to be actively involved in the development of the largest Russian metropolitan telecommunications markets as well as those in the CIS that have the potential for significant growth," added Alexander Vinogradov. In regards to the closure of the Sovintel acquisition, Alexander Vinogradov noted: "The closure process is well on the way and although we had expected to close the transaction in the second quarter, we now expect the transaction to close later in August." Golden Telecom (Ukraine) As noted in the Company's first quarter financial reports, Golden Telecom (Ukraine) was the subject of an investigation initiated by the office of the Prosecutor in Kiev and connected with a commercial dispute between Golden Telecom (Ukraine) with Ukretelecom, the state owned telecommunications monopoly. Golden Telecom (Ukraine) received a letter dated July 17, 2002 from the General Prosecutor of Ukraine stating that effective July 9, 2002 the Prosecutor's Office has withdrawn all charges against Golden Telecom (Ukraine) due to the absence of grounds on which to prosecute. This development is positive however there is no guarantee that this investigation will not be re-opened in the future. More Second Quarter 2002 Results: Consolidated revenues were $39.2 million - up 16 percent compared to the second quarter of 2001, and up 8 percent compared to last quarter. Data and Internet business line revenues were $20.0 million - up 40 percent compared to the second quarter of 2001, and up 10 percent compared to last quarter . Internet subscribers increased to 182,555 - up 20 percent from 152,702 subscribers at the end of the second quarter of 2001, due to organic growth, but subscribers decreased 5 percent compared to last quarter. The sequential decline in Internet subscribers is largely due to seasonal factors. Data and Internet EBITDA1, as a percentage of Data and Internet revenue, was 30 percent - up from 6 percent in the second quarter of 2001, but down from 34 percent last quarter. The sequential decline is in part due to increases in costs for incremental capacity switched on in the second quarter. CLEC revenues were $11.4 million up slightly when compared to the second quarter of 2001, and up 7 percent compared to last quarter. Long Distance business line revenues were $4.6 million - down slightly compared to the second quarter of 2001, but up 7 percent compared to last quarter. Mobile Services revenues were $3.3 million - down 11 percent compared with the second quarter of 2001, but even compared to last quarter. Consolidated EBITDA1 was $11.4 million - up 124 percent from $5.1 million in the second quarter of 2001, and up 1 percent compared to last quarter. Consolidated EBITDA1, as a percentage of consolidated revenue was 29 percent, up from 15 percent in the second quarter of 2001, but down from 31 percent last quarter. This improvement year over year reflects the continued success of our integration of our acquisitions and the drive to control costs. The slight sequential decrease in percentage was due to increases in certain capacity costs, together with some increases in advertising and bad debt expense associated with potential losses due to the KPNQwest bankruptcy proceedings. The net income for the second quarter was $2.8 million compared to a net loss of ($3.5) million in the second quarter of 2001 and compared to a net income of $6.2 million reported last quarter. The year over year improvement was in part due to the effects of new US accounting standards for goodwill and intangible assets that became effective and were adopted by the company from January 1, 2002 and also in part as a result of reduced depreciation and amortization due to the impairment of assets in the fourth quarter of 2001. Net income for the quarter was adversely impacted by the writing down of the balance of our investment in MCT Corp., of $4.1 million. MCT Corp. incurred significant losses in the second quarter of 2002. Equity in losses of ventures was ($1.2) million compared to equity in earnings of ventures of $2.2 million in the second quarter of 2001. Golden Telecom's share of the loss from MCT Corp. more than offset the improved net income from Sovintel. As a result, net income per common share before dilution, in the second quarter of 2002 was $0.12 compared to a net loss of ($0.14) for the second quarter of 2001. The weighted-average number of shares outstanding decreased to 22.7 million compared to 24.6 million in the second quarter of 2001, largely due to the buyback of shares from Global TeleSystems, Inc. in the third quarter of 2001. Net income per common share assuming dilution, in the second quarter of 2002 was $0.12 compared to a net loss of ($0.14) for the second quarter of 2001. The diluted weighted average number of shares outstanding in the second quarter of 2002 was 23.4 million compared to 24.6 million in the second quarter of 2001. Golden Telecom closed the second quarter of 2002 with a total of$53.7 million in consolidated cash, cash equivalents and investments held for sale. About Golden Telecom (www. goldentelecom. ru) Business Wire

 
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