Rostelecom OJSC: 1st Quarter Results

  Rostelecom OJSC: 1st Quarter Results

UK Regulatory Announcement

MOSCOW

 ROSTELECOM REPORTS IFRS CONSOLIDATED FINANCIAL RESULTS FOR THE FIRST QUARTER
                             ENDED MARCH31, 2013

Moscow – May 21, 2013 – Rostelecom OJSC (the “Group” and the “Company”) (MICEX
- RTS: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications
operator, today announced its unaudited IFRS consolidated financial results
for the first quarter ended March 31, 2013.

FIRST QUARTER FINANCIAL HIGHLIGHTS

When analysing our year-on-year performance for the first quarter, it is
important to acknowledge the one-off income and expenditure (“the one off”)
recorded during the first quarter of 2012.

  *Consolidated revenue up 3% year-on-year to RUB 77.1 billion (excluding
    one-off);
  *OIBDA^1 of RUB 28.8 billion with an OIBDA margin of 37.4% (36.9% in 2012);
  *Net income of RUB 6.4 billion, which reflects the absence of Rostelecom’s
    equity share in Svyazinvest’s net profit;
  *CAPEX^2 of RUB 24.9 billion, representing 32.3% of consolidated revenues,
    primarily due to contractual expenses in 2012, including those relating to
    building mobile networks;
  *Net debt^3 of RUB 206.3 billion with a net debt / annualised OIBDA^4 ratio
    of 1.8x as of March 31, 2013.

Sergey Kalugin, President of Rostelecom, commented: “Our results for the first
quarter of 2013 reflect the overall business development trends seen during
the first two months of my tenure. Rostelecom leads the market when it comes
to performance indicators such as the rate at which customers are subscribing
to optic broadband networks and interactive TV services, which are the
industry’s key areas of growth. We are also rolling out mobile data networks
and are actively investing in network upgrades, however it is too early to
talk about the impact new products are going to have on the dynamics of the
Group's revenue. Moreover, as the Company has already warned, these
investments will impact profitability in the medium term, and this is already
noticeable.

We are working on a number of initiatives which will substantially improve our
competitive position and our investment case. We have the largest
communications network in Russia, but it is in need of modernisation. We also
need to introduce new products and services, and we plan to make significant
improvements to our customer service practices. Much also needs to be done to
improve operational efficiency, and we are assessing our corporate governance
procedures. We also plan to change our corporate culture, and increase our
employees’ engagement in Rostelecom’s common goal, which is to combine the
most attractive packages possible, with high levels of customer service.”

RUB million                  1Q 2013  1Q 2012  % change,
                                                  y-o-y
Revenue                       77,067    85,319    (10%)
OIBDA                         28,837    34,408    (16%)
OIBDA margin, %               37.4%     40.3%     
Operating income              11,482    17,792    (35%)
Operating margin, %           14.9%     20.9%     
Net income                    6,413     12,468    (49%)
Net margin, %                 8.3%      14.6%     
Capital expenditure           24,889    20,426    22%
% of revenue                  32.3%     23.9%     
Net debt                      206,304   188,120   10%
Net debt/annualised OIBDA^5   1.8       1.5       
                                                            

^1 Here and below, please refer to Attachment 1 of this statement for a full
definition of OIBDA.
^2 Here and below, capital expenditure (“CAPEX”) comprises cash spent on the
acquisition of fixed and intangible assets.
^3 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.
^4 OIBDA for the past 12 months.
^5 OIBDA for the past 12 months.


KEY OPERATING HIGHLIGHTS

  *Total broadband subscriber base up 12% year-on-year to 9.5 million. The
    number of subscribers connected via the fibre optic network increased 1.6
    times year-on-year to 3.1 million (33% of the total subscriber base);
  *Total pay TV subscriber base increased by 13% year-on-year to 6.8 million,
    of which the number of interactive TV subscribers nearly doubled to reach
    1.6 million;

  *Total number of mobile subscribers increased by 3% year-on-year to 13.6
    million;
  *3G+ network has been built and tested in 24 Russian regions and has been
    commercially launched in 17 regions.

Number of Subscribers   1Q 2013  1Q 2012  % change,  4Q 2012  % change,
(millions):                                  y-o-y                 y-o-y
Local telephony          26.8      28.1      (5%)        27.1      (1%)
Mobile                   13.6      13.3      3%          13.6      0.1%
Broadband Internet       9.5       8.4       12%         9.2       3%
access incl.
Residential              8.8       7.8       12%         8.5       3%
Corporate                0.7       0.6       8%          0.7       1%
Pay TV incl.             6.8       6.0       13%         6.6       2%
IPTV                     1.6       0.8       88%         1.4       10%
                                                                             

KEY EVENTS RELATING TO THE FIRST QUARTER OF 2013 AND AFTER THE REPORTING
PERIOD

Business News

  *Sergey Kalugin appointed as President of Rostelecom;
  *LTE networks tested in Krasnodar and Sochi;
  *Seven regions selected as areas where LTE standard high-speed wireless
    networks will be constructed: Khanty-Mansiysk, Chukotka and Nenets
    Autonomous Areas, Khakassia, North Ossetia–Alania, Sakhalin Oblast and
    Mordovia;
  *A bond placement of RUB 25 billion took place;
  *3G+ networks were commercially launched in 17 regions;
  *Cloud services were launched for corporate customers;
  *The Board of Directors approved that the AGM will take place on 17 June
    2013. In addition, the Board of Directors recommended that the AGM
    approves a 2012 dividend payment of RUB 8.17 billion, or 25% of the
    Company’s net profit for 2012, in accordance with Russian Accounting
    Standards (RAS), which amounts to 23.18% of the net profit for 2012
    according to International Financial Reporting Standards (IFRS), and
    consists of:

       *RUB 4.1022 per Class A preferred share (a total of 3.05% of 2012 net
         profit under RAS or 2.83% of 2012 net profit under IFRS will be
         distributed as a payment under this share class)
       *RUB 2.4369 per ordinary share (a total of 21.95% of 2012 net profit
         under RAS or 20.35% of 2012 net profit under IFRS will be distributed
         as a payment under this share class)

Reorganisation

  *The Board of Directors confirmed that the EGM relating to the Company’s
    reorganisation will take place on 26 June 2013, with the record date being
    15 May 2013;
  *Prices at which Rostelecom’s Board of Directors will buy-out shareholders
    who oppose the reorganisation has been set.

OPERATING REVIEW

Revenue Analysis

Revenue structure by services

RUB million                                    1Q 2013  1Q 2012  % change,
                                                                    y-o-y
Local telephony services                        21,399    21,604    (1%)
Intra-zone telephony services                   4,194     4,797     (13%)
DLD/ILD telephony services                      4,651     5,471     (15%)
Interconnection and traffic transit services    5,376     4,889     10%
Broadband Internet                              13,354    12,158    10%
Pay TV                                          2,772     2,055     35%
Mobile communication services                   9,503     10,031    (5%)
Data services (VPN, data centres, wholesale     5,335     4,995     7%
internet sales)
Rent of channels                                2,608     2,894     (10%)
Other (including one-off earnings in 1Q12)      7,875     16,425    (52%)
Total revenue                                   77,067    85,319    (10%)
Revenue excl. one-off                           77,067    74,894    3%

Revenue structure by customer segments

RUB million             1Q 2013  1Q 2012  % change,
                                             y-o-y
Residential customers    40,806    41,081    (1%)
Corporate customers      17,287    16,364    6%
Governmental customers   10,378    18,965    (45%)
Operators                8,596     8,909     (4%)
Total revenue            77,067    85,319    (10%)
Revenue excl. one-off    77,067    74,894    3%
                                                       

The Company reported a 10% year-on-year decrease in revenue to RUB 77.1
billion in the first quarter of 2013. This trend was influenced by the
following factors:

  *The one-off earnings in 1Q12;
  *10% revenue growth from broadband services, which increased by RUB 1.2
    billion;
  *35% revenue growth from payTV services, which increased by RUB 0.7
    billion;
  *10% revenue growth from interconnection and traffic transit services,
    which increase by RUB 0.5 billion, due to its replacement with mobile
    services and the business growth of other telecommunications operators.

An additional factor which contributed to the decline in revenue relates to
the delivery of international, inter-city, intra-zone and local telephone
network services, as a result of end users’ changing preferences with regards
to how they make calls, and the corresponding traffic migration to mobile
operator networks. Revenues from mobile phone services were down due to a
decrease in pricing for mobile voice services, which is linked to the lack of
mobile data services in the first quarter of 2013. As of the end of March
2013, Rostelecom started to actively launch 3G+ networks in the regions where
it provides mobile voice services. 3G+ networks have so far been developed and
tested in 24 Russian regions, and have been commercially launched in 17
regions.

Operating Profit Analysis

Operating expenses structure (excluding amortization)

RUB million                                   1Q 2013  1Q 2012  % change,
                                                                   y-o-y
Personnel costs                                21,924    21,893    0%
Interconnection charges                        10,168    11,334    (10%)
Materials, repairs and maintenance,            5,949     7,264     (18%)
utilities
Other operating income                         (2,483)   (2,597)   (4%)
Other operating expenses                       12,672    13,017    (3%)
Total                                          48,230    50,911    (5%)
                                                                             

The Company’s total operating expenses, excluding depreciation and
amortisation, decreased by 5% year-on-year to RUB 48.2 billion in the first
quarter of 2013, which was primarily due to the one-off expenses in 1Q12. It
is not possible to separate the effect of these one-off expenses in the cost
items.

The construction of 3G+ networks as part of the active development of
Rostelecom’s mobile business in the regions also had an effect on operating
expenses in the first quarter of 2013. Due to their early phase of
development, operating expenses in the mobile segment are going to be higher
than the returns they generate.

The Company reported OIBDA of RUB 28.8 billion in the first quarter. The OIBDA
margin in 1Q13 was 37.4%, which is higher than the margin of 36.9% for 2012 as
a whole. This corresponds to the Company’s forecast that OIBDA margins will
decrease in the medium-term as a result of actively developing the mobile
business, and increasing the share of rapidly growing segments, which are less
cost efficient in the development stage than traditional segments are.

Depreciation and amortisation expenses increased by 4% year-on–year to RUB
17.4 billion in the first quarter of 2013, as a result of the commissioning of
mobile data transfer networks and a review of the useful lifespan of the
Oracle R11 software, which will lead to an upgrade to Oracle R12 software.

The Company reported an operating profit of RUB 11.5 billion in the first
quarter, which amounts to 14.9% of revenue.

Net Income Analysis

To provide an accurate reflection of the Company’s financial position and
performance in anticipation of the completion of the reorganisation, the
Company has changed the way investments in Svyazinvest are reported. The key
difference is that investments in Svyazinvest will no longer be recognised
using the equity method, and Rostelecom’s share in Svyazinvest’s net profit
will be presented in the financial statements starting from the earliest
possible comparative period. Therefore, income from associated companies in
1Q13 includes OJSC Bashinformsvyaz and others but does not include
Rostelecom’s share in OJSC Svyazinvest’s net profit.

The increase in financial expenses is mainly due to a 3% year-on-year growth
of the total debt to RUB 211.4 billion.

In the first quarter of 2013, profit before tax amounted to RUB 8.2 billion, a
49% year-on-year decrease, mainly due to the one-off earnings in the first
quarter of 2012, as well as an increase in interest expenses due to growth in
total debt..

The Company’s income tax contributions decreased by 49% year-on-year to RUB
1.7 billion in the first quarter of 2013, which reflected changes in profit
before tax. The effective tax rate was 22% in the first quarter of 2013,
compared to the level of 20% established by the Russian Tax Code.

Net income in the first quarter of 2013 totaled RUB 6.4 billion, mainly due to
the following factors:

  *The one-off earnings and expenses in 1Q12;
  *The launch of 3G+ networks in the regions, which continues to put pressure
    on the Company’s profitability in the short-term;
  *An increase in depreciation and amortisation;
  *An increase in interest expenses

FINANCIAL REVIEW

It is essential to consider the one-off earnings and expenses recorded in 1Q12
when analysing the cash flow and balance sheet.

Net operating cash flow decreased by 12% year-on-year to RUB 21.3 billion in
the first quarter of 2013.

Net cash used in investing activities increased by 20% year-on-year to RUB
24.7 billion in the first quarter. CAPEX increased by 22% year-on-year to RUB
24.9 billion. The increase in investment in the reporting quarter resulted
predominantly from contract expenses in 2012, including building mobile phone
networks.

The changes in net cash received from financing activities in the reporting
quarter were related to the increase in cash flow from paying off corporate
bonds and bank loans, as well as the decrease in cash flow from other issuers’
bonds and bank deposits in the first quarter 2013.

As of 31 March 2013, the Group’s total debt decreased by 1% year-on-year to
RUB 211.4 billion. Nearly 99% of the Group’s gross debt was rouble-denominated
as of 31 March 2013.

As of 31 March 2013, the Group’s net debt amounted to RUB 206.3 billion,
equivalent to 1.8x annualised OIBDA.

OTHER INFORMATION

Conference call

Rostelecom’s management will hold a conference call today at 4.00PM (Moscow),
2.00PM (CET), 1.00PM (UK) and 8.00AM (NYT). To participate in the conference
call, please dial:

Russia: +7 495 580 9543
UK/ International: +44 20 8515 2301
US: +1 480 629 9835


A replay of the conference call will be available on the Company’s website
http://www.rostelecom.ru/en/ir/results_and_presentations/financials/2013/ in
due course.

FOR MORE INFORMATION PLEASE CONTACT:

IR department
Tel. +7 (499) 995-97-80
ir@rt.ru


ATTACHMENTS:

1. Reconciliation of OIBDA;

2. Accounting policy specifics affecting Rostelecom’s results for the first
quarter of 2013;

3. Statement of Comprehensive Income for the first three months ended March
31, 2013;

4. Statement of Cash Flows for the first three months ended March 31, 2013;

5. Statement of Financial Position for the first quarter of 2013.

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                         1Q 2013  1Q 2012  % change,
                                                         y-o-y
Operating income                     11,482    17,792    (35%)
Add: Depreciation and amortisation   17, 355   16,616    4%
OIBDA                                28, 837   34,408    (16%)
OIBDA margin, %                      37.4%     40.3%     
                                                                   

ATTACHMENT 2

ACCOUNTING POLICY SPECIFICS AFFECTING ROSTELECOM’S RESULTS FOR THE FIRST
QUARTER OF 2013

Accounting for Rostelecom’s share in Svyzinvest’s net profit

A number of important actions aimed at implementing Rostelecom’s merger with
Svyazinvest and 20 regional companies, have been carried out since the
beginning of 2013 and the date of Rostelecom’s first quarter 2013 report.

The Boards of Directors of Rostelecom and Svyazinvest have agreed the price at
which shares will be exchanged once the reorganisation has been approved. The
Board of Directors of Svyazinvest have approved the decision to buy
Rostelecom’s ordinary shares from Mobitel LLC, while the Board of Directors of
Rostelecom has decided to convene the Extraordinary Meeting of Shareholders to
discuss the reorganisation. The completion of these activities suggests that
the reorganisation of Rostelecom is likely to take place in 2013. To provide
stakeholders with clarity regarding the Company’s financial position and
performance in anticipation of the completion of the reorganisation, the
Company has decided to change the way investments in Svyazinvest are reported.

Moving forward, the key difference is that investments in Svyazinvest will no
longer be recognised using the equity method, and Rostelecom’s share
Svyazinvest’s net profit, starting from the earliest possible comparative
period will be presented in the financial statements. The balance-sheet value
of the investments is no longer recognised as an asset, but is reflected as
equity in the financial statements.

Following the reorganisation, Rostelecom’s consolidated financials will
include the results of the merged companies. Given that the reorganisation is
reflected in the consolidated statements as a transaction under common
control, in accordance with Rostelecom’s current accounting policy, financial
statements for the previous periods will be restated to reflect the impact of
the reorganisation. The accounts will be restated going back to a date, no
earlier than the date at which the companies participating in the
reorganisation will come under Rostelecom’s common control.

Consolidation and inclusion of SKY Link CJSC financial results

The acquisition of Sky Link CJSC (“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 Sky Link was acquired by
Svyazinvest on October 1, 2010.

ATTACHMENT 3

STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2013

                                          Three-month period ended 31 March
                                           2013                 2012
                                                          
                                           (unaudited)          (restated)
                                                                             
Revenue                                    77,067               85,319
Operating expenses
Wages, salaries, other benefits and        (21,924)             (21,893)
payroll taxes
Depreciation, amortization and             (17,355)             (16,616)
impairment losses
Interconnection charges                    (10,168)             (11,334)
Materials, utilities, repairs and          (5,949)              (7,264)
maintenance
Loss on disposal of property, plant and    (54)                 (383)
equipment and intangible assets
Bad debt expense                           (430)                (438)
Other operating income                     2,483                2,597
Other operating expenses                   (12,188)             (12,196)
Total operating expenses, net              (65,585)             (67,527)
Operating profit                           11,482               17,792
Income from associates                     169                  182
Finance costs                              (3,912)              (3,666)
Other investing and financial gain         585                  991
Foreign exchange (loss)/gain, net          (142)                650
Profit before income tax                   8,182                15,949
Income tax expense                         (1,769)              (3,481)
Profit for the period                      6,413                12,468
                                                                             
Other comprehensive income/(loss)
Items that may be reclassified
subsequently to profit and loss:
Revaluation gain/(loss) on                 47                   (109)
available-for-sale investments
Revaluation gain on available-for-sale
investments transferred to profit on       -                    (749)
sale
Exchange differences on translating        (13)                 (77)
foreign operations
Income tax relating to items that may be   (9)                  172
reclassified
Other comprehensive income/(loss) for      25                   (763)
the period, net of tax
Total comprehensive income for the         6,438                11,705
period
                                                                             
Profit attributable to:
Equity holders of the Group                6,435                12,308
Non-controlling interests                  (22)                 160
                                                                             
Total comprehensive income attributable
to:
Equity holders of the Group                6,460                11,545
Non-controlling interests                  (22)                 160
                                                                             
Earnings per share attributable to
equity holders of the Group – basic (in    2.23                 4.21
Roubles)
Earnings per share attributable to
equity holders of the Group – diluted      2.22                 4.16
(in Roubles)
                                                                             

ATTACHMENT 4

STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2013

                                          Three-month period ended 31 March
                                           2013                 2012
                                          (unaudited)     
                                                                (restated)
Cash flows from operating activities
Profit before income tax                   8,182                15,949
Adjustments to reconcile profit before
tax to cash generated
from operations:
Depreciation, amortization and             17,355               16,616
impairment losses
Loss on disposal of property, plant and    54                   383
equipment and intangible assets
Bad debt expense                           430                  438
                                                                             
Income from associates                     (169)                (182)
Finance costs excluding finance costs on
pension and other long-term social         3,725                3,429
liabilities
Other investing and financing gain         (585)                (991)
Foreign exchange gain, net                 142                  (650)
Share-based payment expenses               -                    41
Changes in net working capital:
Increase in accounts receivable            (3,737)              (14,036)
Increase in employee benefits              48                   178
Decrease/(increase) in inventories         395                  (1,046)
Increase in accounts payable, provisions   3,304                10,872
and accrued expenses
Change in other assets and liabilities     (1,337)              (1,003)
Cash generated from operations             27,807               29,998
Interest paid                              (3,962)              (3,529)
Income tax paid                            (2,538)              (2,233)
Net cash provided by operating             21,307               24,236
activities
Cash flows from investing activities
Purchase of property, plant and            (24,889)             (20,426)
equipment and intangible assets
Proceeds from sale of property, plant      316                  49
and equipment and intangible assets
Acquisition of financial assets            (161)                (3,578)
Proceeds from disposals of financial       76                   4,296
assets
Interest received                          3                    62
Dividends received                         -                    7
Purchase of subsidiaries, net of cash      (21)                 (986)
acquired
Acquisition of equity accounting           (5)                  -
investees
Net cash used in investing activities      (24,681)             (20,576)
                                                                             
                                                                             
                                           Three-month period ended 31 March
                                           2013                 2012
                                          (unaudited)
                                                                (restated)
Cash flows from financing activities
Purchase of treasury shares                499                  1,338
Sale of treasury shares                    -                    (18,975)
Proceeds from bank and corporate loans     97,428               110,589
Repayment of bank and corporate loans      (125,159)            (80,557)
Proceeds from bonds                        25,000               -
Repayment of bonds                         (398)                (659)
Proceeds from promissory notes             -                    7,650
Repayment of promissory notes              -                    (2,250)
Repayment of vendor financing payable      (3)                  (49)
Repayment of other non-current financing   (3)                  (3)
liabilities
Repayment of finance lease liabilities     (291)                (456)
Dividends paid to shareholders of the      (67)                 (1)
Group
Acquisition of non-controlling interest    -                    (13,825)
Net cash (used in)/provided by financing   (2,994)              2,802
activities
                                                                             
Effect of exchange rate changes on cash    6                    (21)
and cash equivalents
                                                                             
Net (decrease)/increase in cash and cash   (6,362)              6,441
equivalents
Cash and cash equivalents at beginning     10,370               7,380
of the period
Cash and cash equivalents at the end of    4,008                13,821
the period
                                                                             

ATTACHMENT 5

STATEMENT OF FINANCIAL POSITION

                                                         
                                           31 March 2013   31 December 2012
                                            (unaudited)     (restated)
ASSETS
Non-current assets
Property, plant and equipment               383,424         385,994
Investment property                         254             274
Goodwill and other intangible assets        85,240          87,830
Investments in associates                   5,354           5,179
Other investments                           2,471           2,498
Deferred tax assets                         2,935           2,694
Other non-current assets                    5,285           5,413
Total non-current assets                    484,963         489,882
Current assets
Inventories                                 4,139           4,534
Trade and other accounts receivable         38,778          33,992
Prepayments                                 3,331           3,912
Prepaid income tax                          3,608           2,921
Other investments                           1,137           952
Cash and cash equivalents                   4,008           10,370
Other current assets                        1,325           1,258
Total current assets                        56,326          57,939
Total assets                                541,289         547,821
EQUITY AND LIABILITIES
Equity attributable to equity holders of
the Group
Share capital                               106             106
Additional paid-in capital                  7,119           7,119
Treasury shares                             (35,445)        (36,615)
Retained earnings and other reserves        260,917         254,457
Total equity attributable to equity         232,697         225,067
holders of the Group
Non-controlling interests                   471             493
Total equity                                233,168         225,560
Non-current liabilities
Loans and borrowings                        156,130         150,907
Employee benefits                           11,045          10,997
Deferred tax liabilities                    22,650          22,565
Accounts payable, provisions and accrued    233             230
expenses
Other non-current liabilities               4,772           4,136
Total non-current liabilities               194,830         188,835
Current liabilities
Loans and borrowings                        55,319          63,499
Accounts payable, provisions and accrued    49,402          59,889
expenses
Income tax payable                          124             50
Other current liabilities                   8,446           9,988
Total current liabilities                   113,291         133,426
Total liabilities                           308,121         322,261
Total equity and liabilities                541,289         547,821
                                                                             

                                    * * *

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 9.5 million fixed-line broadband subscribers and over 6.8 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 77.1 billion of consolidated revenues, RUB
28.8 billion of OIBDA (37.4% of revenues) and RUB 6.4 billion of net income
for the first three months ended March 31, 2013.

                                    * * *

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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