Golden Expands Its Business Empire

Alternative Russian service provider Golden Telecom Inc. (Nasdaq: GLDN) expanded its business services empire yesterday by buying a 54 percent stake in Buzton JV, the only alternative provider of fixed-line business services in Uzbekistan (see Golden Telecom Buys Buzton).

Golden made the investment to better serve its business customers in Russia and the Ukraine that have offices in Uzbekistan, as well as to add new clients, CEO Alexander Vinogradov noted in a prepared statement.

The stake cost Golden US$2.8 million. The other major shareholder in Buzton, with a 43.5 percent stake, is incumbent operator and, bizarrely, Buzton's chief rival for enterprise accounts, JSC Uzbektelecom.

Golden's share price, having traded higher during Thursday, closed down 9 cents at $25.91, valuing the operator at $940 million.

The acquisition is firmly in line with Golden's aim to expand its business services empire in Russia and the former Soviet states, where the market for telecom services is heating up (see Russia's Golden Opportunity). It also meets Golden's strategy to gain greater control over the infrastructure it uses, so that it can reduce its reliance on the region's dominant long-distance carrier, Rostelecom, and incumbents such as Uzbektelecom (see Golden Plans Further Buildout).

Buzton had 2003 revenues of just $3.9 million and owns a 32-POP network, with 22 of those POPs situated in Uzbekistan's capital, Tashkent. Its chief equipment suppliers are Cisco Systems Inc. (Nasdaq: CSCO), LM Ericsson (Nasdaq: ERICY), Huawei Technologies Co. Ltd., and Marconi Corp. plc (Nasdaq: MRCIY; London: MONI).

Golden Telecom has built a rapidly growing business around Russia's corporate users. Its first-quarter revenues of $133.2 million were 70 percent up on the same period a year earlier, and the company expects to achieve annual revenues of $510 million to $530 million. It also recently announced its second special quarterly dividend (see Golden Telecom to Pay Dividend).

No one at Golden was available for further comment, or to say whether further similar acquisitions are likely.

— Ray Le Maistre, International Editor, Boardwatch