THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL NOR DOES IT SOLICIT AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE OFFER OR SALE IS NOT PERMITTED.
FILED PURSUANT TO RULE 424(a)
REGISTRATION NO. 333-113836
SUBJECT TO COMPLETION, DATED MAY 7, 2004
PROSPECTUS
(GOLDEN TELECOM LOGO)
---------------------
3,839,823 SHARES OF COMMON STOCK
---------------------
The European Bank for Reconstruction and Development (the "EBRD"), Capital
International Global Emerging Markets Private Equity Fund L.P. ("Capital"),
First NIS Regional Fund SICAV ("First NIS"), Cavendish Nominees Limited
("Cavendish" which together with First NIS is called "Barings"), collectively,
the Selling Stockholders, are offering 3,839,823 shares of common stock of
Golden Telecom, Inc. The Selling Stockholders own or control approximately
21.06% of our outstanding shares of common stock. Following the completion of
the offering, the Selling Stockholders will own or control approximately 10.48%
of our outstanding shares of common stock. We will not receive any of the
proceeds of the offering. This offering is part of a global offering including
an offering to institutional investors outside the United States.
Our shares of common stock currently trade on the Nasdaq National Market
under the symbol "GLDN". The last reported sale price of our shares of common
stock on the Nasdaq National Market on May 5, 2004 was $29.62 per share.
The offering price of the shares of common stock has been determined by
negotiation between UBS Limited, the underwriter for this offering, and the
Selling Stockholders taking into account the prevailing market price for our
shares. See "Plan of Distribution".
UNDERWRITING NET PROCEEDS TO THE
PRICE TO THE PUBLIC COMMISSION SELLING STOCKHOLDERS
-------------------- ------------- ---------------------
Per share of common stock...................... $ $ $
Total.......................................... $ $ $
We will be responsible for paying the registration fee, most of the
offering expenses and our applicable attorney's and accountant's fees relating
to the offer and sale of shares. The Selling Stockholders will be responsible
for paying all selling commissions, a portion of the underwriter's expenses and
their attorneys' fees.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION COMMENCING ON PAGE 11 AND UNDER "FACTORS THAT MAY
ADVERSELY AFFECT FUTURE RESULTS" IN OUR 2003 ANNUAL REPORT ON FORM 10-K, WHICH
IS INCORPORATED HEREIN BY REFERENCE.
IN THIS PROSPECTUS "GOLDEN TELECOM", THE "COMPANY", "WE", "US" AND "OUR"
REFER TO GOLDEN TELECOM, INC. AND ITS CONSOLIDATED SUBSIDIARIES, UNLESS THE
CONTEXT OTHERWISE REQUIRES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
UBS INVESTMENT BANK
The date of this prospectus is May , 2004
YOU MAY RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR CONTAINED
IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION
DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS OR ANY SUPPLEMENT. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR SALE OF THE SHARES OF COMMON STOCK MEANS THAT
INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF THIS
PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN OFFER
TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER
OR SOLICITATION IS UNLAWFUL. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE IN
FRONT OF THOSE DOCUMENTS.
---------------------
This document is only being distributed to and is only directed at (i)
persons who are outside the United Kingdom or (ii) to investment professionals
falling within Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2001 (the "Order") or (iii) high net worth entities,
and other persons to whom it may lawfully be communicated, falling within
Article 49(2)(a)2(d) of the Order (all such persons together being referred to
as "relevant persons"). The shares are only available to and any invitation,
offer or agreement to subscribe, purchase or otherwise acquire such shares will
be engaged in only with, relevant persons. Any person who is not a relevant
person should not act or rely on this document or any of its contents.
Except as described, any invitation or inducement to engage in investment
activity (within the meaning of Section 21 of the Financial Services and Markets
Act 2000 (the "FSMA")) in connection with, or relating to, the sale or purchase
of the shares, may only be communicated or caused to be communicated in
circumstances in which Section 21(1) of the FSMA does not apply. It is the
responsibility of all persons under whose control or into whose possession this
document comes to inform themselves about and to ensure observance of all
applicable provisions of FSMA in respect of anything done in relation to the
shares in, from or otherwise involving, the United Kingdom.
TABLE OF CONTENTS
Incorporation by Reference.................................. 1
Where You Can Find More Information......................... 1
Business Overview........................................... 3
Our Acquisition of Comincom................................. 5
The Offering................................................ 7
Selected Historical Consolidated Financial Data............. 9
Risk Factors................................................ 12
Forward-Looking Statement................................... 12
Dividend Policy............................................. 13
Use of Proceeds............................................. 13
Selling Stockholders........................................ 14
Description of Capital Stock................................ 15
Plan of Distribution........................................ 15
Legal Matters............................................... 17
Experts..................................................... 17
INCORPORATION BY REFERENCE
The Securities and Exchange Commission ("SEC") allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus,
and the information that we file later with the SEC will automatically update
and supersede this information. We incorporate by reference the documents listed
below and any further filings made with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until all of the securities are
sold or until we terminate this offering:
(1) Current Report on Form 8-K/A filed on January 30, 2004, and
Current Reports on Form 8-K filed on February 4, 2004 and furnished on
March 15, 2004 and May 6, 2004;
(2) Annual Report on Form 10-K for the year ended December 31, 2003
filed on March 12, 2004;
(3) Definitive Proxy Statement for the special meeting of shareholders
held on November 28, 2003, filed on October 31, 2003;
(4) Definitive Proxy Statement for the 2004 annual meeting of
shareholders to be held on May 20, 2004, filed on April 13, 2004; and
(5) Quarterly Report on Form 10-Q for the period ended March 31, 2004
filed on May 7, 2004.
You may request a copy of these filings at no cost, by writing or telephoning us
at the following address:
Golden Telecom, Inc.
4400 MacArthur Boulevard, Suite 200
Washington, D.C. 20007
Attention: Julia Marx
Telephone: (202) 332-5997
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement (together with all
amendments and exhibits thereto, the "registration statement") under the
Securities Act with respect to the shares of common stock being offered by this
prospectus. This prospectus does not include all the information set forth in
the registration statement, and you should refer to the registration statement
for further information with respect to our Company.
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and in accordance therewith file periodic reports, proxy and
information statements, and other information with the SEC. The registration
statement and all of these reports, proxy and information statements, and other
information filed by us with the SEC may be inspected and copied at the Public
Reference Room maintained at the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Copies of these materials may be obtained by mail from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The SEC also maintains an Internet site (http://www.sec.gov)
that contains reports, proxy and information statements, and other information
regarding registrants, such as Golden Telecom, Inc., that file electronically
with the SEC. In addition, Golden Telecom, Inc. provides public access to its
annual report on Form 10-K, proxy statements, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to these reports filed with the SEC
under the 1934 Act. These documents may be accessed free of charge on Golden
Telecom, Inc.'s Internet site at the following address: www.goldentelecom.com.
The information on our Internet site is not part of this prospectus. These
documents are provided as soon as is practicable after filing with the SEC,
although not generally on the same day. We will provide to each person,
including any beneficial owner, to whom a prospectus is delivered, a
1
copy of any or all of the information that has been incorporated by reference in
the prospectus but not delivered with the prospectus, upon written or oral
request directed to Golden Telecom, Inc., 4400 MacArthur Boulevard, Suite 200,
Washington, D.C. 20007, Attention: Julia Marx, Telephone: (202) 332-5997, at no
cost to the requester.
2
BUSINESS OVERVIEW
We are a leading facilities-based provider of integrated telecommunications
and Internet services to businesses and other high-usage customers and
telecommunications operators in approximately 200 combined access points in
Moscow, Kiev, St. Petersburg, Nizhny Novgorod, Samara, Kaliningrad, Krasnoyarsk
and other major population centers throughout Russia and other countries of the
Commonwealth of Independent States ("CIS").
We organize our operations into the four business groups, as follows:
- Business and Corporate 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 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 dial-up Internet access to the consumer market and
web content offered through a family of Internet portals throughout
Russia, Ukraine, and Kazakhstan; 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.
We intend to offer all of our integrated telecommunication services under
the Golden Telecom brand although due to the acquisition of OAO Comincom
("Comincom") in December 2003, some services still carry the Combellga brand.
Our dial-up Internet services are distributed under the ROL brand in Russia and
Kazakhstan and under the Svit-On-Line brand in Ukraine.
Additionally, we hold a minority interest in MCT Corp. ("MCT"), which in
turn has ownership interests in 15 mobile operations located throughout Russia
and in Uzbekistan, Tajikistan and Afghanistan. We treat our ownership interest
in MCT as an equity method investment and are not actively involved in the
day-to-day management of its operations. In August 2003, MCT concluded a binding
agreement with OJSC Mobile TeleSystems ("MTS") on the sale of five of its
cellular operators. MTS acquired these five cellular operators from MCT for
approximately $70.0 million and assumed certain guarantees as part of the
transaction.
BUSINESS STRATEGY
Our objective is to be the leading facilities-based alternative voice, data
and Internet services company in Russia and key markets in the CIS. To achieve
this objective, we intend to:
- Pursue Consolidation Opportunities
We intend to pursue consolidation opportunities through selective
acquisitions that will allow us to expand our geographical reach, add to our
service offerings and improve our market share while maintaining operational
control. We will target complementary opportunities that will enable us to
achieve synergies and economies of scale and seek regional opportunities in
major cities where we do not have our own local network infrastructure.
- Increase Market Share by Offering Bundled Data and Voice Services Over an
Integrated Network
Corporate customers increasingly demand integrated telecommunications
solutions from one-stop providers that are able to deliver a full service
offering in the geographical areas in which these corporate customers operate.
As a result, we plan to continue to develop and combine our businesses to create
a unified service
3
platform for local access, local exchange, domestic and international long
distance, data, Internet access and services via turn-key solutions.
- Extend Our Leading Position in High Growth Data and Internet Markets
We plan to build on our position as a leading provider of data and Internet
communication services in Russia and other countries of the CIS by increasing
the number of network access points in our network to facilitate the growing
demand for data and Internet communications.
- Reduce Operating Costs and Satisfy Capacity Needs through Network
Planning and Optimization
Our network strategy includes building and owning our local exchange and
customer access networks. We have entered into long-term lease agreements for
long-distance and international fiber optic cable systems to provide our
regional and global connectivity, supplementing these leased land-based channels
with satellite circuits for redundancy and remote connectivity. We intend to
selectively invest in and to incrementally expand the fiber optic capacity along
our heavy traffic and high cost intercity routes to reduce our unit transmission
costs and ensure sufficient capacity to meet the growing demand for data and
Internet services. Wherever possible, we target customers and products to fully
utilize existing fixed cost network infrastructure.
- Focus Operating Activities and Capital Investments in Major Metropolitan
Areas
We plan to deploy our capital investments primarily in Moscow, Kiev, St.
Petersburg, Nizhny Novgorod, Samara, Kaliningrad, Krasnoyarsk and other major
population centers in the CIS, where demand for our services is most heavily
concentrated. We also intend to expand our operations in regional cities with
sufficiently strong local economies and where we believe potential exists to
grow businesses that complement our current operations.
We consider the recent acquisition of Comincom to be an important part of
this strategy. We view Comincom as a highly complementary business that will
allow us to increase our market share in Moscow and other key metropolitan
markets. We expect significant operating synergies in combining our businesses
and significant opportunities to optimize our network and capital investment
costs.
We believe that we are well positioned to maintain and consolidate our
strong presence in the Russian and CIS telecommunications markets for the
following reasons:
- our early market entry and local market experience;
- our focus on service, quality and reliability;
- our strong infrastructure position in Moscow, Kiev, St. Petersburg,
Nizhny Novgorod, Samara, Kaliningrad and Krasnoyarsk;
- our extensive customer base;
- our extensive range of integrated voice, data and Internet data
telecommunications services;
- our influential shareholder base; and
- our strong balance sheet position.
RECENT DEVELOPMENTS
In September 2002, we purchased the 50% of EDN Sovintel ("Sovintel") that
we did not own from OAO Rostelecom, the Russian national long distance carrier.
As a result of this purchase, we now own 100% of Sovintel. In April 2003, we
merged the operations of TeleRoss, our wholly-owned subsidiary, into Sovintel.
In August 2003, we acquired 100% of OOO Sibchallenge Telecom
("Sibchallenge"), the leading alternative wireline operator in Krasnoyarsk,
Russia. Sibchallenge owns 100% of the ownership interests in ZAO Tel, an
Internet service provider, also based in Krasnoyarsk.
4
In December 2003, we acquired 100% of the shares of Comincom, and its
wholly-owned subsidiary, OAO Combellga ("Combellga"), from Nye Telenor East
Invest AS ("Telenor"). For additional information, see "Our acquisition of
Comincom".
In April 2004, we acquired from our local partner the remaining 49% of OOO
Uralrelcom that we did not previously own.
In April 2004, we acquired 100% of OAO Balticom Mobile that owns 62% of ZAO
WestBaltTelcom, an alternative telecommunications operator in Kaliningrad,
Russia.
We are also negotiating to purchase an alternative telecommunications
operator in Rostov-on-Don, Russia.
Our Board of Directors has approved a plan to transfer 20% of our ownership
interest in our Ukrainian subsidiary in exchange for services provided by a
Ukrainian entity that will become our local partner. We initially arranged to
have these services provided through our largest stockholder, Alfa Telecom
Limited ("Alfa"), which has subcontracted them to the Ukrainian entity. The
arrangement with Alfa is subject to the approval of the disinterested directors
on our Board of Directors and internal approval at Alfa.
Our principal executive offices are located at Representation Office,
Golden TeleServices, Inc., 1 Kozhevnichesky Proezd, Moscow, Russia, 115114 and
our telephone number is (011-7)501-797-9300.
You should consider all the information contained in the captions "Risk
Factors" on page 11 of this prospectus before making an investment in our common
stock. In addition, you should consider the factors described under "Factors
that may adversely affect future results" in our 2003 Annual Report on Form
10-K, which is incorporated herein by reference.
OUR ACQUISITION OF COMINCOM
In December 2003, we acquired 100% of the shares of Comincom, and its
wholly-owned subsidiary, OAO Combellga, from Telenor. As part of this
transaction, we issued shares to Telenor representing 19.5% of our shares
outstanding after the acquisition.
To solidify and extend our position as a leading independent voice, data
and Internet services company in Russia and the CIS, we intend to continue to
grow organically in our established markets and to pursue consolidation
opportunities through acquisitions that allow us to improve and expand our
service offerings while maintaining operational control. Our primary criterion
when reviewing consolidation opportunities is the existence of critical
telecommunications infrastructure that will allow us, if the acquisition is
consummated, to achieve synergies and economies of scale. We purchased Comincom
because we believe the acquisition of Comincom presented an excellent
opportunity to help our company further its objectives in a manner that makes
sound financial and strategic sense.
Comincom is one of the leading facilities-based providers of integrated
telecommunications and Internet services to businesses and other high-usage
customers and telecommunications operators in Moscow, St. Petersburg, Voronezh,
Samara and several other major population centers throughout the Russian
Federation. In addition to Combellga, Comincom has stakes in among other
companies, four regional alternative wireline operators World Trade Telecom,
Zenit Telecom, Nakhodka Telecom and Sakhalin Telecom. Based on 2002 revenues,
management estimates that Comincom had approximately a 12% market share of the
Russian alternative telecommunications market. Comincom offers a major part of
its integrated telecommunication services under the Combellga and Comincom
brands. Their services primarily consist of:
- Primary telecommunication services. Using its own infrastructure,
consisting of fiber optic backbone, fixed copper and fiber as well as
wireless access network, modern switching network, Internet platform
("IP"), and datacom facilities, Comincom provides a range of services
including local exchange and access services, international and domestic
long-distance telephone services to both end-users and other carriers
through more than 20 access points over Russia, international
interconnect services, and radio solutions for long distance vehicles;
and
5
- Value Added Services. In addition to primary telecommunication services,
Comincom also offers broadband solutions, including Asymmetric Digital
Subscriber Lines, WEB-hosting and co-location services, Individual and
corporate e-mail solutions, IP-Virtual Private Networking ("VPN")
services, and Intelligent Network services, including intelligent
routing, voice VPNs, and prepayment card solutions.
Combellga's key customers include embassies, hotels, large office buildings
and large corporate clients. We believe that we will create additional synergies
by offering additional services to a broader range of customers in these key
target areas.
We aim to extend our leading position in high growth data and Internet
markets. Comincom owns or controls numbering capacity and network assets,
including fibre optic cable and customer access networks, in key Russian
municipal areas which is consistent with our network development strategy and
which we believe we can use to increase our penetration in these markets. We
believe that the acquisition will help us to reduce operating costs and satisfy
our infrastructure needs through network planning and optimization.
We have identified significant revenue, cost and capital expenditure
synergies which we expect to occur through 2004 as a result of the acquisition
of Comincom:
- Capital expenditure synergies. Capital expenditure synergies are
expected to be achieved in the areas of network operations, IT systems
and infrastructure and purchasing.
- Cost synergies. Cost synergies are expected to be achieved in the areas
of network operations, product and service development, IT systems and
infrastructure, purchasing and corporate overhead functions.
- Revenue synergies. Revenue synergies are expected to be achieved mainly
through the harmonization of our sales efforts and product offerings.
6
THE OFFERING
Shares offered by the Selling
Stockholders.................. 3,839,823 shares of common stock.
Shares outstanding as of May
3, 2004....................... 36,276,579 shares of common stock. This number
of shares does not include shares of common
stock that may be issued upon the exercise of
employee stock options.
Price......................... $ per share of common stock.
Use of proceeds............... We will not receive any proceeds from the sale
of shares of common stock.
Beneficial Ownership.......... The following table sets forth certain
information, as of May 3, 2004, regarding
ownership of our shares of common stock before
this offering and pro-forma after this
offering.
PERCENTAGE
BENEFICIAL
OWNERSHIP OF OUR
COMMON STOCK
------------------
AS OF
MAY 3, AFTER THE
NAME OF BENEFICIAL OWNER 2004 OFFERING
------------------------ ------ ---------
Alfa Telecom Limited................ 29.58 29.58
Telenor............................. 20.32 20.32
Rostelecom.......................... 11.09 11.09
EBRD................................ 8.28 4.14
Capital............................. 5.86 2.88
Barings............................. 6.92 3.46
Free float.......................... 17.95 28.53
----- -----
100.0% 100.0%
No Lock-Up.................... Neither we, the Selling Stockholders nor our
officers or directors are subject to any
restrictions under the underwriting agreement
on sales or other dispositions of any shares of
common stock they hold after the offering. See
"Plan of Distribution".
Shareholders' Agreement....... We are party to a shareholders' agreement with
the Selling Stockholders, other than the EBRD,
and certain other of our major stockholders.
The shareholders' agreement governs certain
aspects of the relationship of the Selling
Stockholders, other than the EBRD, with us,
including the right of the Selling
Stockholders, other than the EBRD, to nominate
directors and the acquisition, disposition and
voting of shares of common stock beneficially
owned by the Selling Stockholders that are
party to that agreement.
Standstill Agreement.......... We are party to a standstill agreement with the
Selling Stockholders, other than the EBRD, and
certain other of our major stockholders.
Generally, the Standstill Agreement provides
that three of our major stockholders, Alfa
Telecom Limited, Telenor and Rostelecom may not
acquire over 49.99%, 40.00% and 35.00%,
respectively, of our outstanding shares of
common stock on a fully-diluted basis. Similar
"standstill" provisions are applicable to
Capital and Barings whereby neither of these
entities' shareholdings may ex-
7
ceed 20% of our outstanding shares of common
stock. The standstill agreement grants the
stockholders party to that agreement pre-
emptive rights if we issue any equity, with
limited exceptions. The standstill agreement
expires on June 1, 2005 or earlier if certain
events occur.
Risk Factors.................. Prospective purchasers of shares of common
stock should consider carefully the matters set
forth under the caption "Risk Factors" on page
12 of this prospectus and "Factors that may
adversely affect future results" in our 2003
Annual Report on Form 10-K, which is
incorporated herein by reference.
Trading....................... Our common stock is traded on the Nasdaq
National Market under the symbol "GLDN".
8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data at December
31, 1999, 2000, 2001, 2002 and 2003, and for all of the years presented are
derived from consolidated financial statements of Golden Telecom, Inc. which
have been audited by Ernst & Young (CIS) Limited, independent auditors. The
selected historical financial results for the three month periods ended March
31, 2003 and 2004 are derived from unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which Golden Telecom, Inc. considers necessary for a fair presentation
of the financial position and results of operations for these periods.
Operating results for the three months ended March 31, 2004 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 2004. The data should be read in conjunction with the
consolidated financial statements, related notes, and other financial
information included in our Annual Report on Form 10-K for the year ended
December 31, 2003 filed on March 12, 2004, which is incorporated herein by
reference.
FOR THE THREE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------------------- --------------------
1999 2000 2001 2002 2003 2003 2004
-------- --------- --------- --------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues............................... $ 97,931 $ 113,089 $ 140,038 $ 198,727 $ 360,534 $78,376 $ 133,174
Cost of revenues (excluding
depreciation and amortization)....... 40,516 50,954 63,685 91,189 181,085 37,299 68,279
Gross margin........................... 57,415 62,135 76,353 107,538 179,449 41,077 64,895
Selling, general and administrative
(excluding depreciation and
amortization)........................ 41,011 45,420 48,935 46,147 64,384 13,438 26,393
Depreciation and amortization.......... 28,143 31,851 41,398 29,961 45,334 10,405 17,368
Abandonment and restructuring charge... 19,813 -- -- -- -- -- --
Impairment charge...................... -- -- 31,291 -- -- -- --
Income (loss) from operations.......... (31,552) (15,136) (45,271) 31,430 69,731 17,234 21,134
Equity in earnings (losses) of
ventures............................. (6,677) (285) 8,155 4,375 4,687 119 --
Interest income (expense), net......... 2,814 7,126 777 (667) (872) (398) 74
Foreign currency gain (loss)........... (2,739) (390) (647) (1,174) (232) 190 827
Minority interest...................... (1,477) (431) (117) (527) (480) (92) (315)
Other non-operating expense............ -- (148) -- -- -- -- --
Provision for income taxes............. 6,823 990 1,902 4,627 17,399 4,233 7,069
Net income (loss) before cumulative
effect of change in accounting
principle............................ (46,454) (10,254) (39,005) 28,810 55,435 12,820 14,651
Cumulative effect of change in
accounting principle................. -- -- -- 974 -- -- --
Net income (loss)...................... (46,454) (10,254) (39,005) 29,784 55,435 12,820 14,651
Net income (loss) per share before
Cumulative effect of change in
accounting principle -- basic(1)..... (3.38) (0.43) (1.65) 1.20 1.95 0.47 0.41
Cumulative effect of change in
accounting principle................. -- -- -- 0.04 -- -- --
Net income (loss) per
share -- basic(1).................... (3.38) (0.43) (1.65) 1.24 1.95 0.47 0.41
Weighted average shares -- basic(1).... 13,736 24,096 23,605 24,102 28,468 27,060 36,045
Net income (loss) per share before
cumulative effect of change in
accounting principle -- diluted(1)... (3.38) (0.43) (1.65) 1.17 1.90 0.47 0.40
Cumulative effect of change in
accounting principle................. -- -- -- 0.04 -- -- --
Net income (loss) per
share -- diluted(1).................. (3.38) (0.43) (1.65) 1.21 1.90 0.47 0.40
Weighted average
shares -- diluted(1)................. 13,736 24,096 23,605 24,517 29,107 27,380 36,507
9
AT DECEMBER 31, AT MARCH 31,
---------------------------------------------------- --------------------
1999 2000 2001 2002 2003 2003 2004
-------- -------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................ $162,722 $ 57,889 $ 37,404 $ 59,625 $ 65,180 $ 69,294 $ 58,659
Investments available for sale........... -- 54,344 8,976 -- -- -- --
Property and equipment, net.............. 62,176 82,377 98,590 166,121 283,110 167,834 302,671
Investments in and advances to
ventures............................... 45,196 49,629 45,981 721 351 596 168
Goodwill and intangible assets, net...... 53,467 70,045 57,146 127,669 248,843 55,590 249,301
Total assets............................. 366,624 348,456 300,384 435,810 729,226 144,236 764,754
Total debt, including current portion.... 28,029 18,997 22,220 40,495 7,980 32,951 6,859
Minority interest........................ 2,816 3,337 5,967 2,187 2,722 2,279 6,114
Shareholders' equity..................... 288,552 283,193 220,844 307,458 580,231 321,897 590,964
---------------
(1) Per share amounts in this table were calculated based upon the assumption
that the 10,600,000 common shares issued in connection with the formation of
the Company are outstanding for all periods prior to September 30, 1999.
Refer to Note 5 to the Consolidated Financial Statements included in our
Annual Report on Form 10-K for the year ended December 31, 2003 for descriptions
of recent acquisitions that impact the comparability of financial information.
Other business combinations not disclosed in the footnotes were as follows:
In August 1999, we increased our beneficial ownership in TCM from 95% to
100%. We recorded goodwill in the amount of $3.2 million.
An affiliate of ING Barings which indirectly owned 12.25% of Golden Telecom
(Ukraine), contributed its indirect interest in Golden Telecom (Ukraine) to our
wholly owned subsidiary, upon the consummation of the Initial Public Offering
("IPO") on September 30, 1999 in exchange for 420,000 newly issued shares of our
common stock. In accordance with the subscription agreement which was filed with
the SEC at the time of the IPO, an additional 30,000 shares of our common stock
were issued in full and final settlement to the affiliate of ING Barings. Our
beneficial interest in Golden Telecom (Ukraine) increased from 56.75% to 69% as
the result of this transaction.
In June 1999, we acquired the assets of Glasnet, a Moscow based Internet
Services Provider ("ISP"). In July 1999, we acquired a 75% interest in SA Telcom
LLP, a telecommunications and data services provider in Kazakhstan. In December
1999, we acquired the assets of Nevalink, an ISP, and full-equity ownership of
NevaTelecom. Both Nevalink and NevaTelecom provide telecom and Internet services
to the St. Petersburg market. These acquisitions were purchased for
approximately $2.5 million in cash.
In February 2000, our subsidiary, Golden Telecom (Ukraine), acquired 99% of
Sovam Teleport Ukraine, including a 51% interest previously held by third
parties. Sovam Teleport Ukraine is a provider of data and Internet services to
Ukraine-based business. In March 2000, we acquired the assets of Referat.ru and
Absolute Games, two leading vertical Internet portals in the education and
computer gaming categories of the Russian Internet. In April 2000, we acquired
the assets of Fintek, a prominent Moscow-based Web design studio and 51% of
Commercial Information Networks, the largest Internet service provider in Nizhny
Novgorod. In September 2000, SFMT-Rusnet, Inc., our wholly-owned subsidiary,
acquired 25% of SA Telcom LLP, a telecommunications and data services provider
in Kazakhstan, bringing our ownership interest in this company up to 100%. The
total combined purchase price was less than $3.0 million in cash.
In October 2000, we acquired the assets of IT INFOART STARS, a leading
horizontal Russian and English language Internet portal, for approximately $8.3
million in cash. In December 2000, we acquired Agama Limited ("Agama") that owns
the Agama family of web properties for approximately $13.1 million in cash and
the issuance of 399,872 shares of our common stock valued at $3.8 million.
10
In December 2000, we acquired an approximately 24% ownership interest in
MCT Corp. in exchange for our 100% ownership of Vostok Mobile B.V., a
Netherlands registered private limited holding company that owned our Russian
mobile operations.
Refer to Note 4 to the Consolidated Financial Statements included in our
Annual Report on Form 10-K for the year ended December 31, 2003 for a
description of the change in method of accounting for goodwill in 2002.
11
RISK FACTORS
You should carefully consider the following risk factors and the additional
risk factors set forth in our 2003 Annual Report on Form 10-K and other periodic
filings with the SEC relating to us, as well as other information contained in
this prospectus and in documents we incorporate by reference before deciding to
invest in shares of our common stock. Our business, financial condition or
results of operations have been, and could be, materially adversely affected by
the risks faced by us described below and elsewhere in this prospectus and the
documents we incorporate by reference. If any of such risks actually occur the
trading price of our common stock could decline, and you could lose all or part
of your investment.
This prospectus and the documents that we incorporate by reference also
contain forward looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks
faced by us described below and elsewhere in this prospectus and the documents
we incorporate by reference.
FACTORS THAT MAY ADVERSELY AFFECT FUTURE RESULTS
OUR SHARE PRICE HAS BEEN AND MAY CONTINUE TO BE HIGHLY VOLATILE
The price of our shares has been subject to significant volatility since
our initial public offering in 1999. In addition, a number of particular factors
may adversely affect the market price of our shares or cause the market price to
fluctuate and decline materially. These factors, which are described in greater
detail in our 2003 Annual Report on Form 10-K, include:
- issues concerning the perceived risks of investing in Russia and the CIS,
including significant ownership of our shares by a company that is part
of a large Russia-based financial and industrial concern;
- the limited number of our shares available for trading in public markets;
- the potential sale of large blocks of our shares by our management or
large stockholders;
- mergers and strategic alliances in the telecommunications industry; and
- inconsistent or restrictive government regulation in the Russian and
Ukrainian telecommunications industries.
In recent years, the market for stock in technology, telecommunications and
computer companies has been highly volatile. This is particularly true for
companies with a relatively small capitalization, such as ours.
LARGE BLOCKS OF OUR SHARES WILL BE AVAILABLE FOR RESALE FOLLOWING THIS
OFFERING WHICH COULD HAVE A NEGATIVE IMPACT ON OUR SHARE PRICE
The volume of our shares that trades daily on the Nasdaq National Market
has traditionally been low. This relatively low liquidity has meant that
relatively small trades of our shares have, at times, had significant effects on
our share price. After this offering, there will be large blocks of shares
available for resale. Sales of these shares, as well as the market's
anticipation of such a sale, could have a negative impact on our share price.
FORWARD LOOKING STATEMENTS
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Some of the statements contained in this prospectus and other parts of this
document, including, without limitation, our intention to offer all of our
services under the Golden Telecom brand and our expectation that we will
continue to pay dividends are forward-looking and concern our projected
operations, economic performance and financial condition. These forward-looking
statements are made pursuant to the safe harbor provisions of the Securities
Litigation Reform Act of 1995. It is important to note that such statements
involve
12
risks and uncertainties and actual results may differ materially from those
expressed or implied by such forward-looking statements. Among the key factors
that have a direct bearing on our results of operations, economic performance
and financial condition are the commercial and execution risks associated with
implementing our business plan, the political, economic and legal environment in
the markets in which we operate, increasing competitiveness in the
telecommunications and Internet-related businesses that may limit growth
opportunities, and downward price pressures on some of the services that we
offer. These and other factors are discussed in this prospectus. Additional
information concerning factors that could cause results to differ materially
from those in the forward looking statements are contained in our filings with
the SEC and especially in the Risk Factors sections therein, including, but not
limited to, the Company's annual report on Form 10-K for the year ended December
31, 2003, which is incorporated herein by reference.
In addition, any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"will likely result," "are expected to," "estimated," "intends," "plans,"
"projection" and "outlook") are not historical facts and may be forward-looking
and, accordingly, such statements involve estimates, assumptions and
uncertainties that could cause actual results to differ materially from those
expressed in the forward-looking statements. Any such statements are qualified
in their entirety by reference to, and are accompanied by, the factors discussed
throughout this Prospectus and investors therefore should not place undue
reliance on any such forward-looking statements.
Further, any forward-looking statement speaks only as of the date on which
such statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors may emerge from time to time, and it is not
possible for management to predict all of such factors. Further, management
cannot assess the impact of each such factor on the Company's business or the
extent to which any factor or combination of factors may cause actual results to
differ materially from those contained in any forward-looking statements.
DIVIDEND POLICY
In February 2004, our Board of Directors declared a cash dividend of $0.20
per common share to stockholders of record as of March 18, 2004. We paid the
total amount payable of approximately $7.2 million to stockholders on March 29,
2004. We believe that we have reached a level of operating profitability that
allows for capital expenditures on expansion and maintenance to be financed
entirely from operational cash flows, and therefore we expect that a dividend
will be declared by the Board of Directors in the future.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock by the Selling Stockholders in this offering. All proceeds from the sale
of the common stock sold in the offering will be for the account of the Selling
Stockholders.
13
SELLING STOCKHOLDERS
The following table sets forth certain information regarding ownership of
our shares of common stock and rights to acquire our shares of common stock by
each of the Selling Stockholders under this prospectus. For the purposes of this
table, a person or group of persons is deemed to have "beneficial ownership" of
any shares which that person or group of persons has the right to acquire within
60 days after such date, but such shares are not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person.
The percentage of ownership for each beneficial owner is based upon
36,276,579 shares of common stock issued and outstanding as of May 3, 2004. The
column showing ownership after completion of the offering assumes that the
Selling Stockholders will sell all of the securities offered pursuant to this
prospectus. The Selling Stockholders listed in the table may have sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act, some or all of their shares of common stock since the date on
which the information in the table is presented. Information about the Selling
Stockholders may change over time. Any change in this information will be set
forth in prospectus supplements, if required.
The Selling Stockholders will receive all of the net proceeds from the
sales of the shares of common stock and will pay all underwriting discounts and
selling commissions together with certain fees and expenses of the underwriter's
counsel.
Each of the Selling Stockholders, other than EBRD, has nominees appointed
to our board of directors.
SHARE OF COMMON SHARES OF SHARE OF COMMON
STOCK BENEFICIALLY COMMON STOCK STOCK BENEFICIALLY
OWNED PRIOR TO THE BEING OFFERED IN OWNED AFTER THE
OFFERING THE OFFERING OFFERING
------------------- ---------------- -------------------
NUMBER OF NUMBER OF NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENT SHARES SHARES PERCENT
------------------------ --------- ------- ---------------- --------- -------
European Bank for Reconstruction and
Development............................. 3,003,564 8.28 1,501,782 1,501,782 4.14
One Exchange Square
London EC2A 2JN
Capital International Global Emerging
Markets Private Equity Fund L.P. ....... 2,126,405 5.86 1,083,203 1,043,202 2.88
c/o Capital International Inc.
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Cavendish Nominees Limited................ 1,803,212 4.97 901,606 901,606 2.49
c/o International Private Equity
Services
13-15 Victoria Road
P.O. Box 431
St. Peter Port
Guernsey, Channel Islands, GY13ZD
First NIS Regional Fund SICAV............. 706,463 1.95 353,232 353,231 0.97
c/o Bank of Bermuda (Luxembourg) S.A.
13, rue Goethe
B.P. 413
L-2014 Luxembourg
--------- ----- --------- --------- -----
7,639,644 21.06 3,839,823 3,799,821 10.48
14
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares of common
stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par
value $0.01 per share.
The following summary of the rights, privileges, restrictions and
conditions of each of the classes of shares we have issued does not purport to
be complete and is subject to the detailed provisions of, and qualified in its
entirety by reference to, our Certificate of Incorporation and By-laws, and to
the applicable provisions of the General Corporation Law of the State of
Delaware.
OUR COMMON STOCK
As of May 3, 2004, we have issued and outstanding 36,276,579 shares of
common stock, par value $0.01 per share. Stockholders are entitled to one vote
for each share held of record on all matters upon which shareholders have the
right to vote. There are no cumulative voting rights. All shares of common stock
offered by the Selling Stockholders are validly issued, fully paid and
non-assessable. Stockholders are entitled to such dividends as may be declared
from time to time by the Board of Directors out of funds legally available for
that purpose. Upon dissolution, stockholders are entitled to share pro rata in
our assets remaining after payment in full of all of our liabilities and
obligations, including payment of the liquidation preference, if any, of any
preferred stock then outstanding.
As of May 3, 2004, we have 571,275 options outstanding that were granted
under our stock option plan and 832,309 options remain available for grant under
that plan.
OUR PREFERRED STOCK
Our board of directors has the power to issue 10,000,000 shares of $0.01
par value preferred stock. There are no issued and outstanding shares of
preferred stock, and no preferred stock is being offered pursuant to this
prospectus.
Our board of directors may authorize the issuance of one or more series of
preferred stock having rights, including voting, conversion and redemption
rights, and preferences, including dividend and liquidation preferences, that
our board of directors may determine, without further action by our
stockholders.
The issuance of preferred stock by our board of directors could adversely
affect the rights of the holders of common stock. For example, our Board of
Directors could cause to be issued a series of preferred stock would have
preferences over the common stock with respect to dividends and liquidation and
that could, upon conversion or otherwise, have all the rights appurtenant to the
common stock.
PLAN OF DISTRIBUTION
Pursuant to an agreement dated , 2004 among us, the Selling
Stockholders and UBS Limited, the Selling Stockholders have agreed to sell and
UBS Limited has agreed, subject to certain conditions, to purchase from the
Selling Stockholders on , 2004 or such other date as may be agreed to
by the Selling Stockholders and UBS Limited, but in any event not later than
, 2004, the shares of common stock at a price of $ per share,
payable in cash to the Selling Stockholders against delivery by the Selling
Stockholders of such shares of common stock.
All of the shares of common stock in the offering will be underwritten by
UBS Limited. The obligations of the underwriter under the underwriting agreement
may be terminated at its discretion on the basis of its assessment of the state
of the financial markets and may also be terminated upon the occurrence of
certain stated events. In consideration of its services in connection with the
offering, the Selling Stockholders have agreed to pay UBS Limited aggregate
discounts and commissions of % of the gross proceeds of the offering. The
following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriter by the Selling Stockholders:
15
PAID BY THE SELLING STOCKHOLDERS AMOUNT
-------------------------------- ------
Per share of common stock................................... $
Total, at price per share of common stock................... $
The Selling Stockholders have agreed to reimburse the underwriter an
aggregate of up to $300,000 for legal fees incurred in connection with the
distribution of the securities being registered, and we will reimburse the
underwriter up to $50,000 for certain other expenses. We are responsible for the
other costs of the offering.
ITEM AMOUNT
---- --------
SEC Registration Fee........................................ $ 16,084
Accounting Fees and Expenses................................ $125,000
Legal Fees and Expenses..................................... $200,000
Printing Expenses........................................... $ 35,000
Miscellaneous............................................... $ 40,000
--------
TOTAL....................................................... $416,084
========
The public offering price for shares of our common stock is $ per share
of common stock. UBS Limited proposes to offer the shares of common stock
initially at the offering price on the cover page of this prospectus. The shares
of common stock to be sold in the offering will be offered in the United States
by UBS Limited through its US broker-dealer affiliates or agents. Subject to
applicable law, UBS Limited may also offer the shares of common stock outside of
the United States.
Neither we, the Selling Stockholders, nor any of our officers or directors
are subject to any restrictions under the underwriting agreement on further
sales or other dispositions of any of the shares of common stock they hold after
the offering.
Our shares of common stock are quoted on the Nasdaq National Market under
the symbol "GLDN."
We and the Selling Stockholders have agreed to indemnify the underwriter
against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments that the underwriter may be required to make in
respect thereof.
Subscriptions will be received subject to rejection or allotment in whole
or in part and the right is reserved to close the subscription books at any time
without notice. Pursuant to SEC regulations, the underwriter may not, throughout
the period of distribution under this prospectus, bid for or purchase shares of
our common stock. The foregoing restriction is subject to certain exceptions,
provided such bid or purchase is not engaged in for the purpose of creating
actual or apparent active trading in or raising the price of such securities.
These exceptions include a bid or purchase permitted under the SEC rules
relating to market stabilization and passive market making activities and a bid
or purchase made to and on behalf of a customer where the order was not
solicited during the period of distribution. Pursuant to the first of these
exceptions, in connection with this offering, the underwriter may effect
transactions which stabilize or maintain the market price of the shares of
common stock at levels other than those that might otherwise prevail on the open
market. Such transactions, if commenced, may be discontinued at any time.
Subject to the foregoing, in order to facilitate this offering, the
underwriter may purchase and sell shares of our common stock in the open market.
These transactions may include short sales, stabilizing transactions and
purchases to cover positions created by short sales. Short sales involve the
sale by the underwriter of a greater number of securities than they are required
to purchase in this offering. Stabilizing transactions consist of certain bids
or purchases made for the purpose of preventing or retarding a decline in the
market price of such securities while this offering is in progress. The
underwriter also may impose penalty bids, under which selling concessions
allowed to syndicate members or other broker-dealers participating in this
offering are reclaimed if shares of common stock previously distributed in this
offering are repurchased in connection with stabilization transactions or
otherwise. These activities by the underwriter may stabilize, maintain or
otherwise affect the market price of the shares of common stock. As a result,
the price of the shares of common stock may be higher than the price that might
otherwise exist in the open market. If these activities are commenced,
16
they may be discontinued by the underwriter at any time. These transactions may
be effected on the Nasdaq or otherwise.
The underwriter
- has not offered or sold and, prior to the expiry of a period of six
months from the closing of the offering, will not offer or sell any
shares of common stock to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or as agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom for
the purposes of the Public Offers of Securities Regulations 1995;
- has complied and will comply with all applicable provisions of the FSMA
with respect to anything done by it in relation to our shares of common
stock in, from or otherwise involving the United Kingdom; and
- has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to
engage in investment activity (within the meaning of Section 21 of the
FSMA) received by it in connection with the sale of any of our shares of
common stock in circumstances in which Section 21(1) of the FSMA does not
apply to us.
The underwriter may not offer or sell or otherwise transfer any shares of
common stock as part of its initial distribution to or for the benefit of any
person, including legal entities, that are resident, incorporated, established
or having their usual residence in the Russian Federation or to any person
located within the territory of the Russian Federation except in compliance with
Russian law.
The shares of common stock may only be offered or sold in the Netherlands,
as part of their initial distribution or as part of any re-offering, and this
prospectus may only be distributed and circulated, in the Netherlands, to
individuals or legal entities who or which trade in securities in the conduct of
a business or profession, which includes banks, securities firms, insurance
companies, pension funds, investment institutions, central governments, large
international and supranational institutions and other parties, including
treasury departments of commercial enterprises, which are regularly active in
the financial markets in a professional manner.
LEGAL MATTERS
Certain legal matters relating to this offering have been passed upon on
our behalf by Chadbourne & Parke, Chadbourne & Parke LLP and Jeffrey A. Riddell,
General Counsel of the Company, and on behalf of UBS Limited by Skadden, Arps,
Slate, Meagher & Flom (UK) LLP. As of the date hereof, the attorney's working on
this offering, as a group, of each of the foregoing firms, owned, beneficially
or as of record, less than $50,000 of our outstanding shares of common stock.
EXPERTS
The consolidated financial statements and schedule of Golden Telecom, Inc.
appearing in Golden Telecom, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 2003, have been audited by Ernst & Young (CIS) Limited,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedule are incorporated herein by reference in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
The financial statements of EDN Sovintel LLC appearing in Golden Telecom,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 2003, have
been audited by Ernst & Young (CIS) Limited, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such financial statements are incorporated herein by reference in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
17
The financial statements of OAO Comincom and OAO Combellga appearing in the
Proxy Statement for Special Meeting of Shareholders of Golden Telecom, Inc.
dated October 31, 2003, which has been filed with the SEC have been audited by
ZAO PricewaterhouseCoopers Audit, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
18