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Rostelecom OJSC: Final Results



  Rostelecom OJSC: Final Results

UK Regulatory Announcement

MOSCOW

                         ROSTELECOM REPORTS CONSOLIDATED
      IFRS FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FULL YEAR ENDED
                              DECEMBER 31, 2012

Rostelecom OJSC (MICEX-RTS: RTKM, RTKMP; OTCQX: ROSYY) (the “Group” and the
“Company”) Russia’s national telecommunications operator, today announced its
IFRS consolidated^1 financial results for the fourth quarter and twelve months
ending December 31, 2012^2.

The Group’s revenues for 2012 amounted to RUB 321.3 billion, a year-on-year
increase of 7% compared to 2011. The Group’s revenue mix is evolving with the
contribution from Rostelecom’s growth segments, which include mobile
communications, broadband and pay-TV. Rostelecom’s OIBDA margin was 36.9% in
2012, reflecting the active development of the Group’s mobile segment and the
construction of 3G+ networks in 4Q 2012, as well as the increase in revenue
from high-growth segments, though at lower margins than traditional segments,
and the creation of reserves to compensate employees affected by the Group’s
plans to reduce administrative personnel by up to 20% in 2013.

According to the Senior Vice - President of Rostelecom Pavel Zaitsev, ‘In 2012
all managers’ and employees’ efforts were focused on strengthening
Rostelecom’s competitive position. We started to actively explore breakthrough
areas of the business, such as – mobile broadband and pay-TV. So far, we have
built 3G+ networks in 24 regions, 10 of which are already providing commercial
mobile data transmission services to our subscribers. After the launch of our
single interactive TV platform in May 2012, the service’s number of
subscribers doubled to 1.4 million giving Rostelecom a 49% share of the
Interactive TV market.’

KEY OPERATING HIGHLIGHTS:

  * Total number of households passed rose 6% year-on-year, reaching 33.8
    million^3, of which 16.4 million (48%) were passed using FTTx technology
  * Total broadband subscriber base up 12% year-on-year to 9.2 million

       * The B2C subscriber base increased 12% to 8.5 million, of which the
         number of subscribers connected optically, increased 1.6 times
         year-on-year to 2.8 million (or 33% of the total subscriber base),
         giving the Company the highest rate of growth in the market in
         Russia. Rostelecom’s share of the B2C broadband markets is 40%.

  * Total Pay TV subscriber base increased 12% year-on-year to 6.6 million
    subscribers.

       * Out of the total subscriber base, the number of interactive TV
         subscribers more than doubled to 1.4 million, with the penetration of
         optical networks reaching 34%. Rostelecom’s share of the Interactive
         TV market is 49%.

  * Total mobile communications subscribers rose 4% year-on-year to 13.6
    million.
  * The acquisition of SkyLink gave Rostelecom access to 3G licenses in 69
    regions across Russia.
  * So far, 3G+ networks have been constructed and tested in 24 Russian
    regions, with commercial launches having taken place in 10 of those.

KEY FINANCIAL HIGHLIGHTS IN 2012:

  * Revenues up 7% year on year to RUB 321.3 billion
  * OIBDA^4 up to RUB 118.6 billion
  * OIBDA margin of 36.9% compared with 37.5% a year earlier (without taking
    into account the non-monetary effect on Q4 2011 results due to reduced
    long-term social obligations, as a result of a new labour contract signed
    by Rostelecom, its employees and the labour union in December 2011^5).
  * Net profit of RUB 35.2 billion (RAS net profit is used as a basis for
    dividend calculation on preferred shares up to RUB 32.7 billion).
  * Capital expenditure^6 of RUB 91.2 billion, representing 28.4% of
    consolidated revenues
  * Net debt^7 of RUB 203.1 billion with a net debt / OIBDA^8 ratio of 1.7x as
    at December 31, 2012.

KEY FOURTH QUARTER 2012 FINANCIAL HIGHLIGHTS:

  * Revenues up 4% year-on-year to RUB 82.6 billion
  * OIBDA up to RUB 24.6 billion with an OIBDA margin of 29.8% compared to
    32.7% a year earlier (without taking into account the non-monetary effect
    on Q4 2011 results due to reduced long-term social obligations, as a
    result of a new labour contract signed by Rostelecom, its employees and
    the labour union in December 2011).
  * Net profit was RUB 4.6 billion.
  * Capital expenditure of RUB 27.7 billion, that is 33.6% of consolidated
    revenues.

CONSOLIDATION AND INTEGRATION OF ZAO SKY LINK ACCOUNTS

The acquisition of ZAO SKY LINK is a transaction under common control. In
accordance with the Company’s accounting policy under IFRS, such transactions
are accounted for as if the acquisition was completed at the beginning of the
earliest period that is presented in the financial statements, but not earlier
than the period in which Sky Link was acquired under common control of the
Group’s majority shareholder. The comparative information, which is presented
in the current financial statements, has therefore been restated from the date
that ZAO Sky Link was acquired by Svyazinvest, i.e. Oct 1, 2010.

FINANCIAL SUMMARY

                                        %                             %
RUB million         4Q 2012   4Q 2011   change,   FY 2012   FY 2011   change,
                                        y-o-y                         y-o-y
Revenue             82,560    79, 656   4%        321,251   301,494   7%
OIBDA               24, 582   30,855    (20%)     118,554   117,712   1%
OIBDA margin, %     29.8%     38.7%               36.9%     39.0%
Operating profit    7,954     18,410    (57%)     53,825    60,188    (11%)
Operating margin,   9.6%      23.1%               16.8%     20.0%
%
Net profit          4,614     15,489    (70%)     35,240    42,527    (17%)
Net margin, %       5.6%      19.4%               11.0%     14.1%
Capital             27,721    40,584    (32%)     91,181    83,231    10%
expenditures
% of revenue        33.6%     50.9%               28.4%     27.6%
Net debt            203,084   161,516   26%       203,084   161,516   26%
Net
debt/annualized     1.7х      1.4х                1.7х      1.4х       
OIBDA

OPERATING REVIEW

Revenue structure by services^9

                                        %                             %
RUB million         4Q 2012   4Q 2011   change,   FY 2012   FY 2011   change,
                                        y-o-y                         y-o-y
                                                                     
Local telephony     21,286    21,594    (3%)      85,734    88,061    (3%)
services
Intra-zone
telephony           4,669     5,132     (9%)      18,754    21,393    (12%)
services
DLD/ILD telephony   4,986     6,288     (21%)     20,390    24,070    (15%)
services
Interconnection
and traffic         5,550     5,017     11%       21,003    19,774    6%
transit services
Broadband           12,886    12,066    7%        49,797    46,396    7%
Internet
Pay TV              2,555     1,859     37%       9,147     6,706     36%
Mobile
communication       10,172    10,320    (1%)      41,161    40,660    1%
services
Data services
(VPN, data
centres,            5,714     5,275     8%        20,815    18,872    10%
wholesale
Internet sales)
Rent of channels    2,443     2,798     13%       11,269    10,365    9%
Cloud services      4,826     2,339     106%      6,625     2,764     140%
Other               7,473     6,608     13%       36,556    22,442    63%
Total revenue       82,560    79,656    4%        321,251   301,494   7%

Revenue structure by customer segments

                                      % change,                       %
RUB million       4Q 2012   4Q 2011   y-o-y       FY 2012   FY 2011   change,
                                                                      y-o-y
Residential       40,569    41,550    (3%)        162,493   165,634   (2%)
customers
Corporate         18,651    19,925    (6%)        69,015    69,555    (1%)
customers
Governmental      14,851    10,996    35%         53,452    34,484    55%
customers
Operators         8,489     7,185     18%         36,291    31,821    14%
Total revenue     82,560    79,656    4%          321,251   301,494   7%

Revenue in 4Q 2012 rose 4% compared to the same period last year and amounted
to RUB 82.6 billion, which was made up from:

  * Growth in revenue from cloud and IT services, as well as revenue from
    infrastructure rental as part of other revenues
  * Growth in revenues from providing broadband services to a growing
    subscriber base
  * Growth in revenues from providing pay-TV services to a growing subscriber
    base.

This growth was partially offset by a decline in revenues from Domestic Long
Distance and International Long Distance and intrazonal telephony services,
which primarily reflected on-going changes in usage patterns for traditional
fixed-line services.

Rostelecom’s revenue in 2012 reached RUB 321.3 billion, a 7% increase over
2011, achieved due to growth in cloud and IT service segments, but also from
growth in revenue from providing broadband and pay-TV services.

Key operating indicators

Number of Subscribers        4Q 2012   4Q      % change,   3Q      % change,
(millions):                            2011    y-o-y       2012    y-o-y
Household passed             33.8      32.0    6%          33.4    1%
incl FTTх                    16.4      12.9    27%         15.7    4%
Local telephony              27.1      28.5    (5%)        27.5    (1%)
Mobile                       13.6      13.1    4%          13.5    0.3%
Broadband Internet access    9.2       8.2     12%         8.9     4%
incl.
Residential                  8.5       7.6     12%         8.2     4%
Corporate                    0.7       0.6     9%          0.6     2%
Pay TV incl.                 6.6       5.9     12%         6.4     4%
IPTV                         1.4       0.7     102%        1.2     19%
                                                                              
Traffic, generated by
residential and corporate
subscribers^10 (billions
of minutes)
Intra-zone                   2.4       2.7     (11%)       2.3     4%
DLD                          1.2       1.3     (13%)       1.1     8%
ILD                          0.1       0.1     (13%)       0.1     (4%)

The number of households passed grew 6% year-on-year to 33.8 million^11,
including 16.4 million (or 48%) passed by FTTx technology. The number of
broadband subscribers grew 12% compared to the equivalent period last year,
rising to 9.2 million subscribers. The subscriber base in the broadband B2C
segment grew 12% to 8.5 million, out of which, those connected by FTTx
technology grew 1.6 times year-on-year to 2.8 million (that is 33% of the
total subscriber base), representing the highest rate of growth in the Russian
market. Rostelecom’s share of the B2C broadband market was 40%.

The number of pay-TV subscribers grew 12% compared to the equivalent period
last year, comprising 6.6 million subscribers. Of that total, the number of
interactive TV subscribers more than doubled to 1.4 million, with the
penetration of optical networks making up 34%. Rostelecom’s share of the
Interactive TV market was 49%.

The number of mobile subscribers grew 4% compared with the equivalent period
last year, rising to 13.6 million subscribers. The acquisition of SkyLink gave
Rostelecom access to 3G licenses in 69 regions across Russia. So far, 3G+
networks have been built and undergone testing in 24 Russian regions, with
commercial launches taken place in 10 areas.

The number of subscribers to fixed-line local telephone services decreased
year-on-year and quarter-on-quarter, due to changes in client preference in
favour of mobile means of communication, although remaining significantly
lower than for international peer companies.

Operating Expenses^12 Structure

                                      %                               %
RUB million       4Q 2012   4Q 2011   change,   2012       2011       change,
                                      y-o-y                           y-o-y
Personnel costs   22,942    16,856    36%       84,308     76,252     11%
Interconnection   12,853    10,770    19%       47,312     40,736     16%
charges
Materials,
repairs and       6,360     6,902     (8%)      27,358     27,507     (1%)
maintenance,
utilities
Other operating   (3,523)   (4,538)   (22%)     (13,868)   (14,711)   (6%)
income
Other operating   19,346    18,812    3%        57,587     53,998     7%       
expenses
Total             57,978    48,802    19%       202,697    182,782    10%      

In 4Q 2012 the Company’s operating expenditure, excluding depreciation and
amortisation, rose 19% year-on-year, to RUB 58.0 billion principally due to:

  * Personnel expenditure growing to RUB 22.9 billion, or 36%, compared to 4Q
    2011 due, in the main part, to the effect of the one-off reduction in
    long-term social obligations, as a result of a new labour contract signed
    by Rostelecom, its employees and the labour union in December 2011 by RUB
    4.8 billion, as well as the recruitment of commercial staff in the mobile
    segment, but also the creation of reserves to compensate employees
    affected by the Group’s plans to reduce administrative personnel by up to
    20% in 2013
  * Increased expenditure on operator services by 19% in comparison with the
    equivalent period in 2011 to RUB 12.9 billion, in connection with the
    increase in direct expenditure, dependent on the growth of the Company’s
    revenues.
  * The growth of other operating income and expenses in 4Q 2012, and FY 2012,
    was due to the increase in advertising expenditure linked to increased
    marketing activity promoting the Company’s services.

Operational expenditure, excluding depreciation and amortisation, in 2012 was
RUB 202.7 billion, up 10% compared to the equivalent period last year, in the
main part, due to:

  * 11% growth in personnel expenditure compared to the equivalent period in
    2011 to RUB 84.3 billion, due to the effect of the one-off reduction in
    long-term social obligations, as a result of a new labour contract signed
    by Rostelecom, its employees and the labour union in December 2011 by RUB
    4.8 billion, the recruitment of commercial staff in the mobile segment,
    and also the creation of reserves for compensation due to employees as
    part of the plan to reduce administrative personnel by 20% planned for
    2013
  * Increased expenditure on operator services by 16% year-on-year to RUB 47.3
    billion, in connection with the increase in direct expenditure, which
    relates to the growth of the Company’s profits.

The Company reported a 4Q 2012 OIBDA of RUB 24.6 billion and RUB 118.6 billion
for the whole of 2012 with OIBDA margins in these periods of 29.8% and 36.9%
respectively.

Depreciation and amortisation expenses in 4Q 2012 rose 34% compared to 4Q 2011
to RUB 16.6 billion, in connection with the reversal of the Amdocs software
reserve. In 2012, amortization expenses rose 13% compared to 2011 to reach RUB
64.7 billion due to the video surveillance project for the Presidential
elections and the commissioning of new fixed assets, specifically the
construction of 3G networks.

Rostelecom’s capital expenditure in 4Q 2012 was RUB 27.7 billion, 32% lower
than for the corresponding period in 2011. In 2012, capital expenditure rose
10% overall compared to 2011, reaching RUB 91.2 billion. The 2012 increase in
CAPEX primarily comprised of the maintenance of existing channels and the
construction of new channels, to enable the video observation of the
Presidential elections. Also, the modernization of broadband networks, the
implementation of new IT systems, the launch of new services and the expansion
of 3G networks required additional investment.

The Company reported an operating profit of RUB 8.0 billion in Q4 2012 and RUB
53.8 billion for 2012, with operating margins of 9.6% and 16.8% respectively.

The growth of financial expenditure in connection with the rise in gross debt
was in part compensated by the positive effect of the exchange rate.

Profit before tax in 4Q 2012 was RUB 4.7 billion and, RUB 44.0 billion for
2012, representing decreases of 74% and 17% respectively on the equivalent
periods of 2011. This was for the most part due to the increase in
amortization, but also as a result of the one-off decrease in expenditure from
the pension plan in 4Q 2011.

The Company’s rate of income tax in 4Q 2012 decreased 96% compared to 4Q 2011
to RUB 0.1 billion, whilst the full year of 2012 saw it decrease 18% to RUB
8.8 billion. This change in income tax related to changes to pre-tax profit.
The effective income tax-rate for 4Q 2012 was 2%, whilst for the whole year
the rate remained at 20%, in line with the Tax Code level of 20%. A lower
effective rate in 4Q 2012 was due to the decrease in the level of taxable
income generated by the losses realised by ZAO Sky Link.

The Group reported a net profit of RUB 4.6 billion in Q4 2012, and RUB 35.2
billion for 2012,.

FINANCIAL REVIEW

Net operating cash flow rose 13% by the end of 2012 to RUB 96.2 billion.

Net cash used for investment activities decreased 24% by the end of 2012 to
RUB 87.5 billion. This decrease is linked to the use of investment funds in
acquiring 71.8% of the shares in OAO NTK in 1Q 2011.

The decrease in the amount of net cash received from financial activity by the
end of 2012 was linked to Rostelecom’s acquisition of 3.86% ordinary shares in
OOO Mobitel, but also the buyback of 28.2% of shares in OAO NTK.

The Group’s total debt rose 24% year-on-year to RUB 214.4 billion. More than
98% of the Company’s total debt was ruble-denominated as of 31^st December
2012.

Rostelecom’s net debt, as of 31^st December 2012, was RUB 203.1 billion, which
is 1.7x and the Group’s OIBDA margin as at the end of 2012.

KEY EVENTS IN 2012 AND AFTER THE END OF THE REPORTING PERIOD

Operational Update:

  * Rostelecom signed a co-operation agreement with the retail networks of
    Svyaznoy and Euroset
  * Rostelecom launched federal bundle services for small- and mid-sized
    businesses.
  * Rostelecom successfully organised the video surveillance of the Russian
    Presidential Elections on March 4, 2012.
  * Rostelecom took receipt of federal LTE licenses.
  * Rostelecom carried out test launches of 3G+ networks in 24 regions.
  * Rostelecom carried out test launches of LTE base stations in Krasnodar and
    Sochi.
  * Rostelecom launched 3G+ networks commercially in 10 regions: in the
    Irkutsk region, in Primorsky and Perm Krai, in the Ulyanovsk region, in
    Penza region, in the Republic of Tatarstan, in the Nizhny Novgorod region,
    in the Saratov region, and in the Orenburg and Samara regions.
  * Rostelecom launched corporate bonds worth a total sum of RUB 35 billion.
  * Rostelecom’s Board of Directors’ approved the implementation of the
    2013-017 development strategy.
  * Rostelecom’s Board of Directors approved the appointment of Sergey Kalugin
    as President of Rostelecom to succeed Alexander Provotorov

Reorganisation:

  * Acquisition of 3.86% of Rostelecom’s own ordinary shares, consequently
    increasing the Treasury’s stake to 6.55%
  * The Decree relating to the merger of Rostelecom and Svyazinvest was signed
    by the President of the Russian Federation.
  * State approval received for the acquisition of ZAO Sky Link, an additional
    share issue by Svyazinvest and also the transfer of additional Svyazinvest
    telecom assets.
  * In relation to the additional Svyazinvest share issue, Rostelecom acquired
    an additional 140,315,416 Svyazinvest shares to safeguard its 25% +1 stake
    until the merger.
  * The Rostelecom Board of Directors approved the price at which one ordinary
    and one preferred share will be bought from shareholders who vote against
    or do not take part in the voting over the company's reorganization. The
    buyback price of one ordinary share has been set at RUB 136.05 , with the
    price of one privileged share at RUB 95.24 as set by the independent
    appraiser Ernst and Young.

M&A:

  * The acquisition of 100% of ZAO Sky Link gave Rostelecom access to 3G
    licenses in 69 regions across Russia
  * The acquisition of 28.2% of NTK, increasing Rostelecom’s share of the
    company to 100%.

OTHER INFORMATION

Conference call

Rostelecom will host a conference call today at
8.00 AM (EST) / 12.00 PM (UK) / 1.00 PM (CET) / 4.00 PM (MOSCOW)

To participate in the conference call, please dial:

Russia +7 495 580 9543
UK/ International: +44 208 515 2301
US: +1 480 629 9835

A replay of the conference call will be available on the Company’s website
http://www.rostelecom.ru/ir/results_and_presentations/financials/IFRS/2012/ in
due course.

ATTACHMENTS:

1. Reconciliation of OIBDA;
2. Statement of Comprehensive Income for Q4 and 2012
3. Statement of Cash Flows for 2012
4. Statement of Financial Position for 2012

^1 Q1 2011 financial results include contributions from North-West Telecom
OJSC, CenterTelecom OJSC, Southern Telecommunications Company OJSC,
VolgaTelecom OJSC, Uralsvyazinform OJSC, Sibirtelecom OJSC, Far East Telecom
OJSC (“RTOs”), and also Dagsvyazinform OJSC and Rostelecom OJSC (under RAS),
which had been under common control of Svyazinvest OJSC and were merged with
Rostelecom on April 1, 2011. Operating activities include contributions from
Sky Link CJSC, which was acquired by Rostelecom from Svyazinvest on July 27,
2012

^2 Q4 2012 represents unaudited results; 2012 audited

^3 Calculated as the sum of total number of households passed by xDSL, FTTx
and xPON technologies, excluding technology intersections.

^4 Here and below, please refer to Attachment 1 to this statement for a full
definition of OIBDA

^5 The non-monetary effect was RUB 4.7 billion on OIBDA margin in Q4 2011 and
in total in 2011 without taking into account the non-monetary effect on the
result of Q4 2011, due to the reduced long-term social obligations, as a
result of the new labour contract signed by Rostelecom, its employees and the
labour union in December 2011, which made up 39% .

^6 Here and below, capital expenditure (“CAPEX”) comprises cash spent on
purchase of property, plant and equipment and intangible assets

^7 Here and below, net debt is calculated as the sum of long-term loans and
short-term borrowings minus cash and cash equivalents and short-term
investments

^8 OIBDA for the last 12 months

^9 Effective from April 1, 2011, the methodological changes in the revenue
structure include the following: 1) revenue from DLD/ILD traffic transit,
which were previously included in the “DLD / ILD telephony services” reporting
line, are now included in the “Interconnection and traffic transit services”
reporting line; 2) revenue from mobile interconnection services, previously
included in the “Interconnection and traffic transit services” reporting line,
are now presented under "Mobile Communication Services"; 3) other
methodological changes had no significant impact on the reporting structure

^10 Excluding traffic, generated by other telecom operators

^11 Calculated as the sum of total number of households passed by xDSL, FTTx
and xPON technologies, excluding technology intersections.

^12 Excluding depreciation and amortisation

ATTACHMENT 1

RECONCILIATION OF OIBDA

OIBDA is a non-U.S. GAAP and non-IFRS financial measure, which the Company
defines as operating income before depreciation and amortisation. We believe
that OIBDA provides useful information to investors because it is an indicator
of the strength and performance of our business operations, including our
ability to finance capital expenditures, acquisitions and other investments
and our ability to incur and service debt. OIBDA should not be considered in
isolation as an alternative to net income, operating income or any other
measure of performance under U.S. GAAP or IFRS.

                                        %                             %
RUB million         4Q 2012   4Q 2011   change,   2012      2011      change,
                                        y-o-y                         y-o-y
Operating income    7,954     18,410    (57%)     53,825    60,188    (11%)
Add: Depreciation   16,628    12,445    34%       64,729    57,524    13%
and amortisation
OIBDA               24,582    30,855    (20%)     118,554   117,712   1%
OIBDA margin, %     29.8%     38.7%               36.9%     39.0%      

ATTACHMENT 2

STATEMENT OF COMPREHENSIVE INCOME FOR THE FOURTH QUARTER AND TWELVE MONTHS
ENDED DECEMBER 31, 2012

                         Twelve -month periods         Three -month period
                         ended                         ended
                         31.12.2012   31.12.2011       31.12.2012   31.12.2011
                                                                   
Revenue                  321,251      301,494          82,560       79,656
Operating expenses
Wages, salaries,
other benefits and       (84,308)     (76,252)         (22,942)     (16,856)
payroll taxes
Depreciation,
amortisation and         (64,729)     (57,524)         (16,628)     (12,445)
impairment losses
Interconnection          (47,312)     (40,736)         (12,853)     (10,770)
charges
Materials,
utilities, repairs       (27,358)     (27,507)         (6,360)      (6,902)
and maintenance
Loss on disposal
of property, plant       (822)        (792)            (282)        174
and equipment and
intangible assets
Bad debt expense         (1,318)      (572)            (152)        (109)
Other operating          13,868       14,712           3,523        4,538
income
Other operating          (55,447)     (52,634)         (18,912)     (18,876)
expenses
Total operating          (267,426)    (241,305)        (74,606)     (61,248)
expenses, net
Operating profit         53,825       60,189           7,954        18,410
Income from              4,293        4,474            807          1,737
associates
Finance costs            (16,005)     (13,069)         (3,841)      (2,804)
Other investing          1,440        2,078            (351)        651
and financial gain
Foreign exchange         480          (377)            156          105
gain/ (loss), net
Profit before            44,033       53,295           4,725        18,099
income tax
Income tax expense       (8,793)      (10,767)         (111)        (2,610)
Profit for the           35,240       42,528           4,614        15,489
year
                                                                                
Other
comprehensive
income
Revaluation (loss)
/ gain on                (407)        15               (255)        189
available-for-sale
investments
Revaluation gain
on
available-for-sale       (740)        -                -            -
investments
transferred to
profit on sale
Exchange
differences on           (89)         -                (22)         -
translating
foreign operations
Share of other
comprehensive
(loss)/ gain             (102)        3                (39)         14
recognized by
associates
Income tax in
respect of other         228          (3)              51           (38)
comprehensive loss
items
Other
comprehensive            (1,110)      15               (265)        165
income for the
year, net of tax
Total
comprehensive            34,130       42,543           4,349        15,654
income for the
year
                                                                                
Profit
attributable to:
Equity holders of        35,064       42,701           4,558        15,508
the Group
Non-controlling          176          (173)            56           (19)
interests
                                                                                
Total
comprehensive
income
attributable to:
Equity holders of        33,960       42,716           4,294        15,673
the Group
Non-controlling          170          (173)            55           (19)
interests
                                                                                
Earnings per share
attributable to
equity holders of        12.14        14.32            1.60         4.84
the Group – basic
(in RUB)
Earnings per share
attributable to
equity holders of        12.06        14.10            1.60         4.79
the Group –diluted
(in RUB)

ATTACHMENT 3

STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 2012 AND 2011

                                                        Year ended 31 December
                                                        2012         2011
Cash flows from operating activities                                
Profit before income tax                                44,033       53,295
Adjustments to reconcile profit before tax to cash
generated
from operations:
Depreciation, amortization and impairment losses        64,729       57,524
Loss on sale of property, plant and equipment and       822          792
intangible assets
Bad debt expense                                        1,318        572
Income from associates                                  (4,293)      (4,474)
Finance costs excluding finance costs on pension and    15,054       12,030
other long-term social liabilities
Other investing and financial gain                      (1,440)      (2,078)
Foreign exchange (gain)/ loss, net                      (480)        377
Share-based payment expenses                            18           588
Changes in net working capital:
Increase in accounts receivable                         (7,628)      (1,599)
Increase/ (decrease) in employee benefits               378          (4,445)
Decrease/ (increase) in inventories                     240          202
Increase/ (decrease) in accounts payable, provisions    4,459        (5,804)
and accrued expenses
Increase/ (decrease) in other assets and liabilities    1,960        (309)
Cash generated from operations                          119,170      106,671
Interest paid                                           (16,015)     (12,230)
Income tax paid                                         (6,924)      (9,064)
Net cash provided by operating activities               96,231       85,377
Cash flows from investing activities
Purchase of property, plant and equipment and           (91,181)     (83,231)
intangible assets
Proceeds from sale of property, plant and equipment     1,864        1,486
and intangible assets
Acquisition of financial assets                         (4,436)      (8,565)
Proceeds from disposals of financial assets             8,300        9,176
Government grant received                               -            1,105
Interest received                                       236          934
Dividends received                                      827          193
Purchase of subsidiaries, net of cash acquired          (1,287)      (32,281)
Proceeds from disposals of subsidiaries, net of cash    82           -
disposed
Acquisition of equity accounted investees               (1,908)      (3,640)
Net cash used in investing activities                   (87,503)     (114,823)
Cash flows from financing activities
Sale of treasury shares                                 2,775        1,754
Purchase of treasury shares                             (22,126)     (1,487)
Proceeds from bank and corporate loans                  532,663      296,398
Repayment of bank and corporate loans                   (491,724)    (250,410)
Proceeds from bonds                                     10,000       -
Repayment of bonds                                      (7,285)      (13,932)
Proceeds from promissory notes                          22,863       12,050
Repayment of promissory notes                           (22,939)     (15,984)
Repayment of vendor financing payable                   (163)        (368)
Proceeds from / (repayment of) other non-current        (13)         72
financing liabilities
Repayment of finance lease liabilities                  (1,824)      (3,150)
Acquisition of non-controlling interest                 (15,628)     (366)
Dividends paid to shareholders of the Group             (12,131)     (116)
Dividends paid to non-controlling shareholders of       (190)        (303)
subsidiaries
Net cash (used in)/provided by financing activities     (5,722)      24,158
Effect of exchange rate changes on cash and cash        (16)         (26)
equivalents
Net increase/(decrease) in cash and cash equivalents    2,990        (5,314)
Cash and cash equivalents at beginning of year          7,380        12,694
Cash and cash equivalents at the end of year            10,370       7,380

ATTACHMENT 4

STATEMENT OF FINANCIAL POSITION

                                           31 December 2012   31 December 2011
ASSETS                                                       
Non-current assets
Property, plant and equipment              385,994            335,205
Investment property                        274                259
Goodwill and other intangible assets       87,830             88,937
Investments in associates                  37,389             34,746
Other investments                          2,498              3,635
Deferred tax assets                        2,694              1,127
Other non-current assets                   5,413              13,562
Total non-current assets                   522,092            477,471
Current assets
Inventories                                4,534              4,763
Trade and other accounts receivable        33,992             28,790
Prepayments                                3,912              2,706
Prepaid income tax                         2,921              3,309
Other investments                          952                3,926
Cash and cash equivalents                  10,370             7,380
Other current assets                       1,258              1,268
Total current assets                       57,939             52,142
Total assets                               580,031            529,613
                                                               
EQUITY AND LIABILITIES
Equity attributable to equity holders of
the Group
Share capital                              106                106
Additional paid-in capital                 34,839             34,736
Treasury shares                            (36,615)           (17,161)
Retained earnings and other reserves       257,143            247,253
Total equity attributable to equity        255,473            264,934
holders of the Group
Non-controlling interests                  493                7,784
Total equity                               255,966            272,718
Non-current liabilities
Loans and borrowings                       150,907            91,851
Employee benefits                          12,130             11,752
Deferred tax liabilities                   23,236             20,813
Accounts payable, provisions and accrued   230                85
expenses
Other non-current liabilities              4,136              3,689
Total non-current liabilities              190,639            128,190
Current liabilities
Loans and borrowings                       63,499             80,972
Accounts payable, provisions and accrued   59,889             39,196
expenses
Income tax payable                         50                 242
Other current liabilities                  9,988              8,295
Total current liabilities                  133,426            128,705
Total liabilities                          324,065            256,895
Total equity and liabilities               580,031            529,613

                                    * * *

For more information please visit http://www.rostelecom.ru/en/ir or contact:

“Rostelecom Investor Relations / Rostelecom IR” application for iPhone and
iPad is now available to download for free from the Apple App Store via:
https://itunes.apple.com/ru/app/rostelecom-investor-relations/id596370946?mt=8.

Investor Relations Department
Tel. +7 (499) 995 97 80
ir@rt.ru

                                    * * *

Rostelecom (www.rostelecom.ru) is Russia’s largest national telecommunications
operator with presence in all Russian regions. The Group is a universal
operator and undisputable leader of broadband and pay-TV markets in Russia
with over 9 million fixed-line broadband subscribers and over 6.5 million
pay-TV subscribers. As Rostelecom develops its mobile data networks, its
position as a major mobile operator is growing with over 13.5 million
currently subscribed to Rostelecom’s mobile voice services. The Group is also
an important innovator that provides solutions in the field of medicine,
E-Government, cloud computing and education.

Rostelecom was assigned a ‘BBB-’ and ‘BB+’ international credit ratings by
Fitch Ratings and Standard & Poor’s respectively, both with a ‘Stable’
outlook. The Group generated RUB 321.3 billion of consolidated revenues, RUB
118.6 billion of OIBDA (36.9% of revenues) and RUB 35.2 billion of net income
for the twelve months ended December 31, 2012.

                                    * * *

Certain statements in this press release are forward-looking statements within
the meaning of the U.S. federal securities laws and are intended to be covered
by the safe harbors created thereby.

Those forward-looking statements include, but are not limited to:

  * Management’s assessment of the Company’s future operating and financial
    results as well as forecasts of the present value of future cash flows and
    related factors;
  * the Company’s anticipated capital expenditures and plans to construct and
    modernize its network;
  * the Company’s expectations as to the growth in demand for its services,
    plans relating to the expansion of the range of its services and their
    pricing;
  * the Company’s plans with respect to improving its corporate governance
    practices;
  * the Company’s expectations as to its position in the telecommunications
    market and the development of the market segments within which the Company
    operates;
  * economic outlook and industry trends;
  * the Company’s expectations as to the regulation of the Russian
    telecommunications industry and assessment of impact of regulatory
    initiatives on the Company’s activity;
  * other statements regarding matters that are not historical facts.

Such forward-looking statements are subject to risks, uncertainties and other
factors, which could cause actual results to differ materially from those
expressed or implied by these forward-looking statements. These risks,
uncertainties and other factors include:

  * risks relating to changes in political, economic and social conditions in
    Russia as well as changes in global economic conditions;
  * risks relating to Russian legislation, regulation and taxation, including
    laws, regulations, decrees and decisions governing the Russian
    telecommunications industry, securities industry as well as currency and
    exchange controls relating to Russian entities and their official
    interpretation by regulatory bodies;
  * risks relating to the Company, including the achievement of the
    anticipated results, levels of profitability and growth, ability to create
    and meet demand for the Company’s services including their promotions, and
    the ability of the Company to remain competitive in a liberalized
    telecommunications market;
  * technological risks associated with the functioning and development of the
    telecommunications infrastructure, technological innovations as well as
    the convergence of technologies;
  * other risks and uncertainties. For a more detailed discussion of these and
    other factors, see the Company’s Annual Report and the Company’s other
    public filings.

Many of these factors are beyond the Company’s ability to control or predict.
Given these and other uncertainties, readers are cautioned not to place undue
reliance on any of the forward-looking statements contained herein or
otherwise. The Company does not undertake any obligation to release publicly
any revisions to these forward-looking statements (which are made as of the
date hereof) to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events, except as may be required
under applicable laws.

Contact:

Rostelecom OJSC
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