The Russia Journal

Golden Telecom (GTI) put its books in order last week, announcing a cut in losses to $10.3 million for 2000, but analysts said other unresolved questions were the real issues facing the company.

GTI's founder and major shareholder, European telecom company Global TeleSystems (GTS), is planning to sell off its 62 percent stake to improve its cash-flow situation — and analysts say that the identity of any new partner is crucial to GTI's future. The remaining 38 percent of stock is held by institutional investors.

Analysts are also keeping an eye on whether GTI can consolidate Sovintel into its business. GTI owns 50 percent of the Internet and telecom firm and wants to acquire the rest.

GTI officials acknowledged that there were questions hanging over the company's future, but they added that operations were proceeding without difficulties.

"It [the planned sale] is part of GTS' restructuring, but it's a big hypothetical question — meanwhile, it's business as usual," said John Rose, a spokesman for Golden Telecom. But analyst Andrei Braginsky of Renaissance Capital said the disposition of the GTS stake was causing some anxiety at the company.

"There is a lot of uncertainty about whether Golden Telecom will exist at all and what sort of business it will be," he said. "The shape of the company depends on who becomes the strategic shareholder."

Observers say the stake has caught the eye of domestic and foreign investors, including Alfa-Bank, Telenor and Systema Group, and that any fresh input could change the direction of the company.

"There are a number of potential buyers, and this is the main question for GTI," said Braginsky. "It could emerge as a different entity with a different focus. The announcement could come today or in six months."

Andrei Bogdanov, an analyst at Alfa-Bank, agreed the fate of the 62 percent share needed to be resolved. "There should be an announcement within weeks," he said.

Meanwhile, the remaining 50 percent of Sovintel is held by Rostelecom, the long-distance telephone operator. Renaissance Capital's Braginsky said consolidating Sovintel would be "critically important" for GTI.

GTI revenues rose 16 percent year on year to $113 million. The loss of $10.3 million in the year 2000 compared with a loss of $47 million recorded in the preceeding year.