Golden Telecom announces first-ever dividend and reports results for 2003
11 Mar 2004
MOSCOW, Russia (March 11, 2004) - Golden Telecom, Inc.'s (NASDAQ: "GLDN") consolidated revenue rose 81% in 2003 to $360.5 million. Net income rose 86% to $55.4 million. Consolidated revenue in the fourth quarter of 2003 was $111.3 million, up 45% from the fourth quarter 2002, and net income in the fourth quarter 2003 was $18.2 million, up 40% from the same quarter in 2002. Here are some of the highlights for 2003 vs. 2002: Consolidated revenues of $360.5 million - up 81%
Consolidated operating income of $69.7 million - up 122%
Consolidated net income of $55.4 million - up 86%
Consolidated net cash flow from operations of $87.0 million - up 72%
Consolidated EBITDA1 of $115.0 million - up 87% Here are some of the highlights for the fourth quarter 2003 vs. the fourth quarter 2002: Consolidated revenues of $111.3 million - up 45%
Consolidated operating income of $16.8 million - up 17%
Consolidated net income of $18.2 million - up 40%
Consolidated net cash flow from operations of $23.9 million - up 9%
Consolidated EBITDA1 of $30.0 million - up 21% Alexander Vinogradov, Chief Executive Officer and President of Golden Telecom, Inc. commented: "In 2003 we experienced organic revenue growth of approximately 21% reflecting increased demand from existing customers and our ability to sign up new customers in both Moscow and in regional cities. The annual revenue growth of 81% consists of this organic growth combined with the impact of acquisitions made over this period, most notably Sovintel in September 2002 and Comincom/Combellga in December
2003. During the last year we focused our efforts on integrating Sovintel into our operations and the increase in net income of 86% over the year indicates clear success at this level. Our challenge in 2004 is to integrate the operations of Comincom/Combellga and drive synergies at the revenue, cost and capital expenditure lines in order to extend our position as the leading voice, data, and Internet service provider
in Russia and the Commonwealth of Independent States (CIS). We recently announced the appointment of a new Chief Operating Officer, Michal Cupa, to assist in this endeavor. As a result of these efforts, we are pleased to announce that, for the first time in its history, Golden Telecom will pay a quarterly dividend of 20 cents per share on March 29, 2004 to its shareholders of record as of March 18, 2004. We believe that we have reached a level of operating profitability that allows for expansion and maintenance capital expenditure to be financed entirely from operational cash flows, and therefore we expect that a dividend will also be paid in future quarters. Our net cash position and strong credit rating means that most potential acquisitions could be financed by either existing cash reserves or by borrowings. This dividend is evidence of our commitment to improve shareholder returns by a combination of capital growth and a responsible level of dividends. The year also saw developments in the regulatory environment with the passage of new Laws on Telecommunications in Russia and Ukraine. There are two main areas where Golden Telecom will be affected by the Russian Law - firstly the new law creates a new interconnect pricing regime in 2004 that
should be more transparent and unified - and secondly a Universal Service Charge calculated as a percentage of revenue will be introduced from 2005 to improve telecommunication services in rural areas. The full effects of this law will only become clear when the enabling regulations are published by the Russian Ministry of Communications and we will comment further when this happens. I am also pleased to report that a preliminary agreement has been reached with the Russian Ministry of Communications that will allow us to route our customers' international and long distance traffic over our own network in return for giving up our non-geographical code numbering capacity. I believe this agreement will provide significant operational opportunities including the ability to directly interconnect with international and long distance operators. The main impact of the Ukrainian Law on Telecommunications was the prohibiting of all telecommunication operators from charging their end user customers for incoming calls from September 19, 2003. As a result we entered into an agreement with the incumbent operator, Ukrtelecom, to assign national destination code numbering to our mobile customers and we reallocated our network interconnect capacity in Kiev from our mobile to our fixed line network. These actions were completed in November and thereafter we began to receive a settlement from revenue generated when a third party fixed line customer calls our mobile customer. While this stabilized our revenues, the margins on this business were lower than the margins earned previously for incoming calls." David Stewart, Chief Financial Officer of Golden Telecom, Inc. noted: "Our revenue growth for the fourth quarter was extremely strong at 24% compared to the previous quarter however the operating margins were lower than previous quarters of 2003. This was partly due to the impact of the changes in the regulatory environment in Ukraine as well as by unusually high levels of equipment sales at lower margins to Business and Corporate Services customers in Russia. We also incurred consulting costs
associated with the operational integration of Comincom/Combellga of approximately $0.4 million and advertising costs were also higher than in previous quarters by approximately $1.0 million due to several year end marketing and branding initiatives. The purchase accounting for the Comincom/Combellga and Sibchallenge acquisitions required intangible assets to be recorded and amortized - the impact of this additional amortization for the fourth quarter was $0.8 million and was mostly attributable to our Business and Corporate Services business line. In 2003 our cash flow from operations exceeded our capital expenditure by $23.3 million. We ended the year with cash of $65.2 million, up from $59.6 million at the end of 2002, despite repaying $35.1 million
in debt that was outstanding at the end of 2002, and paying $15.4 million for the acquisition of Sibchallenge in August 2003. We received $4.7 million from a special dividend paid by our equity investee, MCT Corp., in November 2003 and recorded net proceeds from the exercise of employee stock
options during 2003 of $23.7 million. With minimal debt and strong cash flow, Golden Telecom is in an excellent financial position, and is well positioned to take advantage of the opportunities that we expect 2004 will offer, such as the recently
announced acquisition of Samara-Telecom in February 2004 for $4.8 million. We expect 2004 revenues to be in the range of $510-$530 million, operating income in the range of $105-$110 million, depreciation and amortization in the range of $65-$70 million, and capital expenditure to be in the range
of $85-$95 million. Following on from our integration of Comincom/Combellga's operations we expect to reduce headcount in early 2004 and consequently incur a reorganization charge in the range of $2-$3
million." The company also announced that it is again conducting discussions with certain of its stockholders in connection with a proposed underwritten offering of its Common Stock, par value $0.01, owned by these
stockholders. No shares are expected to be offered by the company. The offering, if it occurs, is expected to be registered with the U.S. Securities and Exchange Commission. The company expects that the
offering will take place in the April-June 2004 time period. This Press Release does not constitute an offer of any securities for sale or the solicitation of an offer to buy, nor shall there be any sale of these
securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state or jurisdiction.
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