Organic growth and planned acquisitions: Golden Telecom reports results for the second quarter of 2003
13 Aug 2003
MOSCOW, Russia (August 13, 2003) - Golden Telecom, Inc.'s (NASDAQ: "GLDN") consolidated revenue in the second quarter of 2003 was $80.7 million and consolidated net income was $11.9 million. Here are some of the highlights for the second quarter 2003 vs. the second quarter 2002:
Consolidated revenues of $80.7 million - up 106%
Consolidated operating income of $17.5 million - up 243%
Consolidated net income of $11.9 million - up 325%
Consolidated net cash flow from operations of $26.0 million - up 122%
Consolidated EBITDA1 of $28.0 million - up 146%
Total business segment revenues of $80.8 million - up 15%
Total business segment EBITDA1 of $28.0 million - up 21% (Business segment information is defined as the results of Golden Telecom, Inc. plus the results of 100% of Sovintel and a number of non-consolidated regional joint ventures for all periods referenced.) Alexander Vinogradov, Chief Executive Officer and President of Golden Telecom, Inc. commented: "Our second quarter operating results show continuing growth and demonstrate our ability to execute on our business model as we integrate the operations of Sovintel and TeleRoss. We are very pleased by our organic revenue growth of 15% relative to the same quarter last year. Still, the Russian market is very dynamic and we are facing strengthening competition and a changing regulatory environment as outlined in the new Law on Telecommunications. To meet these new challenges, it is important that we build economies of scale in our operations and networks and achieve the critical mass necessary to protect our commercial interests. Thus, prudent acquisitions remain an important element of our growth strategy. In the second quarter, we announced the signing of a Memorandum of Understanding to acquire Sibchallenge in Krasnoyarsk for approximately $15 million. We recently executed a Share Purchase Agreement to acquire that property and expect the transaction to close in the third quarter, assuming the satisfaction of the numerous conditions precedent in this transaction. We believe that this deal represents good value for our shareholders - it will establish our presence in the dynamic resource-rich Krasnoyarsk region. As well as a good customer base, Sibchallenge has numbering capacity and interconnect agreements that are vital for growing this successful operation. We can add our management, existing networks, marketing and technology expertise to leverage this regional investment.
In the second quarter we also announced that we were in talks to acquire the Moscow based alternative operator Comincom, and its wholly owned subsidiary Combellga, from Telenor in an all-share deal. These talks remain on track." Stan Abbeloos, Chief Operating Officer of Golden Telecom, Inc. said: "The second quarter saw growth across all major lines of business with the exception of Operator Services. The growth in Business Services of 12% relative to the first quarter was particularly pleasing as this business line represents our largest segment. In Business Services, a net gain of nearly 885 new corporate customers was achieved during the second quarter and 16 new multi-tenant business centers were signed up. We saw a 10% quarter-on-quarter decline in Operator Services in the second quarter. This line of business tends to produce uneven revenue streams and there were a number of one-off revenue items in the first quarter such as equipment sales, and extraordinary traffic revenues that were not repeated in the second quarter. Also, we face increasing competition from other operators in this sector. " David Stewart, Chief Financial Officer of Golden Telecom, Inc. noted: "Golden Telecom finished the quarter in a strong financial position with net cash in excess of $50 million. We continued to generate significant positive free cash flow, and were able to pay off our $30 million debt to Citibank during the quarter. While we certainly face challenges in certain segments of our business, we reiterate our earlier 2003 guidance of revenue in the range of $320-340 million, EBITDA1 in the range $100-120 million, and capex in the range of $55-65 million. Note that this guidance does not include the potential effects of acquisitions that we may close during the year. We have also changed our line of business reporting. Statement of Financial Accounting Standards 131 "Disclosures about Segments of an Enterprise and Related Information" requires that if a reorganization causes the chief decision-maker to alter the way that performance is assessed and resources are allocated inside the company, then the line of business reporting should change to reflect this. The merger of our two largest wholly owned Russian operating subsidiaries was completed on April 15, 2003. All assets, liabilities, rights and obligations of Teleross were transferred to Sovintel as of this date. Following the completion of the merger of Sovintel and TeleRoss, the distinction between our CLEC, Data and Internet and long distance businesses, became less meaningful for the purpose of our financial reporting and business planning. We have reorganized from a product-based internal structure to a structure based on client focus, and from this quarter forward, our line of business reporting will reflect
this as follows: Business Services: the results of our voice and data operations with corporate customers (large and small) as well as retail customers, across all geographical markets and all industry segments (except other telecom companies); Operator Services: the results of our voice and data operations with foreign and Russian telecommunications operators including mobile operators, such as VimpelCom; Consumer Internet: the results of our dial up Iinternet and related businesses in Russia; Mobile: the results of our mobile operations with distributors and end-users in Kiev and Odessa. We have also reported business segment2 revenue and EBITDA1, which includes the results of Golden Telecom, Inc. plus the results of 100% of Sovintel and some of our non-consolidated regional ventures. This allows a comparison of the performance of the four lines of business that takes into account the effects of past acquisitions, in particular that of Sovintel." MCT Corp., in which Golden Telecom holds an approximately 22% stake, yesterday announced that it has signed an agreement to sell its equity interests in five Russian cellular operators to OJSC "Mobile Telesystems" for $70 million.
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