Rostelecom OJSC: 3rd Quarter Results

  Rostelecom OJSC: 3rd Quarter Results

UK Regulatory Announcement

MOSCOW

 ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE THIRD
                    QUARTER AND FIRST NINE MONTHS OF 2013

Moscow, Russia – November 20, 2013 – Rostelecom OJSC (MOEX: RTKM, RTKMP;
OTCQX: ROSYY), Russia’s national telecommunications operator, today announces
its consolidated financial results for the third quarter and the first nine
months of 2013 prepared in accordance with IFRS^1.

NINE MONTHS FINANCIAL HIGHLIGHTS

When comparing year-on-year performance, it is important to note the presence
of substantial one-off revenues (“one-offs”) during the first nine months of
2012.

  *Consolidated revenues up 2% year-on-year to RUB 232.3 billion (excluding
    the one-off revenues in the first quarter of 2012). Revenues decreased by
    3% year-on-year after factoring in one-off revenues;
  *OIBDA^2 amounted to RUB 87.1 billion with an OIBDA margin of 37.5%, higher
    than the OIBDA margin for full-year 2012 (36.9%) and the second quarter of
    2013 (37.4%);
  *Net income of RUB 24.2 billion, reflecting the absence of Rostelecom’s
    share in Svyazinvest’s^3 net income;
  *Capital expenditure^4 of RUB 45.8 billion (19.7% of revenue);
  *Net debt^5 of RUB 208.3 billion as of 30 September, 2013 with a net
    debt/OIBDA^6 ratio of 1.9x;
  *Net cash from operating activities of RUB 63.0 billion with free cash flow
    of RUB 17.1 billion.

THIRD QUARTER FINANCIAL HIGHLIGHTS

  *Consolidated revenues up 2% year-on-year to RUB 78.2 billion;
  *OIBDA of RUB 29.4 billion with an OIBDA margin of 37.6%, compared to 36.9%
    for the full year 2012, and 37.4% for the second quarter of 2013;
  *Net income up 12% year-on-year to RUB 10.5 billion;
  *Capital expenditure of RUB 13.9 billion (17.8% of revenue).

Sergey Kalugin, Rostelecom’s President, commented: “Efforts taken to
strengthen our market positions in key segments and improve on our internal
efficiency led to positive results during the quarter. Not only do we continue
to grow our broadband and pay-TV subscriber base, but we also increased our
net income during the quarter. Furthermore, all the necessary corporate
procedures associated with the reogranisation of Rostelecom have been
successfully executed, with Svyazinvest and a range of subsidiaries now merged
with Rostelecom. The Company now has a simplified shareholder base,
cross-ownership has been eliminated and the state, together with the Bank for
Development and Foreign Economic Affairs, hold direct ownership of more than
51% of Rostelecom’s voting shares.

All of these developments have contributed to significant levels interest in
Rostelecom from high-profile investors, including the Russian Direct
Investment Fund and Deutsche Bank. A further important step in the
optimisation of our shareholder structure was taken through the recent
repurchase of a significant minority shareholding.”

Kai-Uwe Mehlhorn, Vice-President - Chief Financial Officer, added: “The
Company’s third quarter results are testament to the fact that it continues to
actively develop its broadband and pay-TV segments and is successfully
replacing stagnating income from fixed telephony with income from these
promising segments. The focus on operating efficiency, which has seen us
optimise relationships with vendors and contractors, is already having a
positive effect on our financial performance, with improvements to procurement
efficiency enabling savings of over RUB 12 billion over the past two reporting
quarters.”

                                        %                               %
RUB million       3Q 2013  3Q 2012  change,   9M 2013  9M 2012  change,
                                        y-o-y                           y-o-y
Revenue           78,220   76,985   2%        232,317  238,691  (3%)
OIBDA               29,398    29,414    (0%)        87,065    94,335    (8%)
OIBDA margin, %     37.6%     38.2%                 37.5%     39.5%
Operating           13,257    13,422    (1%)        37,521    46,234    (19%)
income
Operating           16.9%     17.4%                 16.2%     19.4%
margin, %
Net income          10,544    9,385     12%         24,232    29,333    (17%)
% of revenue        13.5%     12.2%                 10.4%     12.3%
Capital             13,935    21,602    (35%)       45,826    63,460    (28%)
expenditure
% of revenue        17.8%     28.1%                 19.7%     26.6%
Net debt            208,293   197,593   5%          208,293   197,593   5%
Net
debt/annualised   1.9      1.6               1.9      1.6      
OIBDA
                                                                        

KEY OPERATING HIGHLIGHTS

  *The number of broadband subscribers grew by 10% year-on-year to 9.8
    million, and the number of subscribers connected to the fibre optic
    network grew by 40% year-on-year to 3.5 million (36% of the subscriber
    base);

       *The B2C subscriber base grew by 11% to 9.1 million
       *The pay-TV subscriber base increased by 10% year-on-year to 7 million
         subscribers, of which the number of IPTV subscribers increased by
         nearly 1.5 times to 1.8 million.

  *The number of mobile subscribers grew by 4% year-on-year to 14.1 million.

Number of subscribers         3Q    3Q    % change,   2Q 2013  % change,
(million)                      2013   2012   y-o-y                   y-o-y
Local telephony services      25.9  27.5  (6%)        26.4     (2%)
Mobile communication           14.1   13.5   4%            13.8      2%
services
Broadband Internet             9.8    8.9    10%           9.6       2%
Residential                    9.1    8.2    11%           8.9       2%
Corporate clients              0.7    0.6    6%            0.7       1%
Pay-TV                         7.0    6.4    10%           6.9       2%
IPTV                          1.8   1.2   49%         1.7      8%
                                                                     

SIGNIFICANT EVENTS RELATING TO THE THIRD QUARTER OF 2013 AND AFTER THE END OF
THE REPORTING PERIOD

Business News

  *In November 2013, the IPTV subscriber base reached 2 million;
  *3G networks were launched in Saint Petersburg and Novosibirsk;
  *A project to reform contact centres got underway;
  *An agreement on transit traffic between Europe and Asia was signed with
    China Telecom.

Reorganisation

  *Rostelecom’s Board of Directors has closed its order books on requests
    made to participate in the share buyback from those shareholders who did
    not agree to the Company’s reorganisation (the merger of Svyazinvest and a
    range of subsidiary companies). The Company has acquired 6.5% of its
    ordinary shares and 17.5% of its preferred shares as part of the process.
  *On 1 October 2013, the Company’s reorganisation was essentially finalised
    by merging OJSC Svyazinvest and a range of other companies (either
    directly or indirectly controlled by Rostelecom and/or Svyazinvest) to
    OJSC Rostelecom, its parent company.

M&A News

  *The Russian Direct Investment Fund (RDIF) and Deutsche Bank, one of the
    leading international banks, collectively acquired 72,187,366 Rostelecom
    ordinary shares. The investment amounted to RUB 7.674 billion.
  *Rostelecom’s subsidiary LLC Mobitel acquired 7.45% of Rostelecom’s
    ordinary shares from OJSC Gazprombank in a transaction worth RUB 25.2
    billion.

Other News

  *Fitch affirmed Rostelecom’s rating at the BBB- investment category with a
    stable outlook.

OPERATING REVIEW

Revenue Analysis

Revenue structure by services

                     3Q       3Q       %           9M                  %
RUB million        2013    2012    change,   2013     9M 2012  change,
                                       y-o-y                           y-o-y
Local telephony    20,497  21,125  (3%)      63,156   64,448   (2%)
services
Intra-zone
telephony            4,032    4,568    (12%)       12,378    14,085    (12%)
services
DLD/ILD
telephony            4,081    4,859    (16%)       12,938    15,400    (16%)
services
Interconnection
and traffic        6,558   5,418   21%       17,621   15,453   14%
transit services
Broadband            13,326   12,381   8%          40,006    36,925    8%
Internet
Pay-TV               2,887    2,274    27%         8,345     6,472     29%
Mobile
communication        9,883    10,512   (6%)        29,325    30,989    (5%)
services
Data services
(VPN, data
centres,             5,451    4,891    11%         16,341    14,843    10%
wholesale
Internet sales)
Rent of channels     2,463    3,006    (18%)       7,709     8,818     (13%)
Other (including
one-off income     9,042   7,952   14%       24,498   31,259   (22%)
in the first
quarter of 2012)
Total revenue      78,220  76,985  2%        232,317  238,691  (3%)
Revenue without    78,220  76,985  2%        232,317  227,872  2%
one-off expenses
                                                                       

Revenue structure by customer segments

                                       %                               %
RUB million      3Q 2013  3Q 2012  change,   9M 2013  9M 2012  change,
                                       y-o-y                           y-o-y
Residential      39,683   40,163   (1%)      120,608  121,924  (1%)
customers
Corporate          18,732    16,844    11%         53,444    50,364    6%
customers
Governmental       10,624    10,191    4%          30,803    38,601    (20%)
customers
Operators        9,181    9,787    (6%)      27,462   27,802   (1%)
Total revenue    78,220   76,985   2%        232,317  238,691  (3%)
Revenue
without          78,220   76,985   2%        232,317  227,872  2%
one-off
expenses
                                                                       

The Company reported a 2% year-on-year increase in revenue to RUB 78.2
billion. This trend was influenced by the following factors:

  *21% revenue growth from interconnection and traffic transit services
    having attracted additional volumes from other operators to Rostelecom’s
    networks (an increase of RUB 1.1 billion);
  *14% increase in other income due to the active development of Intelligent
    Network Services, and also the provision of equipment and infrastructure
    for rent (an increase of RUB 1.1 billion);
  *An 8% rise in revenue from broadband services due to an expanded
    subscriber base (an increase of RUB 0.9 billion).

Revenues from international, inter-town, intra-zonal and local telephony
services continue to decline following changes to end-user preferences, and
the migration of the corresponding traffic to mobile operators’ networks.
Revenue from mobile services fell due to a decrease in average ARPU, which
relates to a widespread lack of mobile data services.

During the first nine months of 2013, the Group’s consolidated revenue
increased by 2% year-on-year to RUB 232.3 billion, excluding one-off income in
the first quarter of 2012. This is largely due to growth in the broadband
internet segment and pay-TV services.

Operating Income Analysis

Operating expenses structure (excluding amortization)

                                       %                               %
RUB million       3Q 2013  3Q 2012  change,  9M 2013   9M 2012   change,
                                       y-o-y                           y-o-y
Personnel costs   20,157   19,206   5%       62,653    61,003    3%
Interconnection   12,533   11,812   6%       34,838    34,459    1%
charges
Materials,
repairs and       7,693    6,924    11%      19,596    20,494    (4%)
maintenance,
utilities
Other operating   (5,394)  (4,023)  34%      (10,636)  (10,345)  3%
income
Other operating   13,833   13,652   1%       38,801    38,745    (0,1%)
expenses
Total             48,822   47,571   3%       145,252   144,356   1%
                                                                

In the third quarter of 2013, operating expenses excluding amortization grew
by 3% year-on-year and amounted to RUB 48.8 billion mainly due to:

  *A 5% year-on-year increase in personnel costs to RUB 20.2 billion,
    following more accurate planning and regular accruals of reserves for
    employee bonuses this year (in 2012 the principal sum of accruals took
    place in the fourth quarter);
  *An 11% year-on-year increase in materials, repairs and maintenance
    expenses to RUB 7.7 billion, including those incurred through repairing
    cable line infrastructure and an increase in utilities tariffs;
  *A 6% year-on-year increase in interconnection charges to RUB 12.5 billion
    including those owing to growth in corresponding income.

Operating expenses excluding amortization for the nine months of 2013 remained
flat compared to the corresponding period of last year and amounted to RUB
145.3 billion.

OIBDA for the third quarter of 2013 reached RUB 29.4 billion and RUB 87.1
billion for the first nine months of 2013, with an OIBDA margin of 37.6% and
37.5% respectively.

Depreciation and amortisation expenses increased by 1% year-on-year to RUB
16.1 billion in the third quarter 2013, and rose by 3% year-on-year to RUB
49.6 billion in the nine months of 2013.

The Company’s operating income amounted to RUB 13.3 billion in the third
quarter of 2013 and to RUB 37.5 billion for the first nine months of 2013,
which equates to 16.9% and 16.2% of revenue respectively.

Net Income Analysis

The decrease in financial expenses in the third quarter and first nine months
of 2013 by 12% and 5% respectively is due to the more active capitalization of
interest expenses relating to increasing construction expenses, as well as the
optimisation of the interest expenses of subsidiary companies to more closely
align them with Rostelecom’s expenses.

Profit before tax in the third quarter of 2013 rose by 18% year-on-year and
amounted to RUB 13.1 billion. For the nine months 2013, profit before tax
decreased by 19% year-on-year to RUB 30.4 billion.

The Company’s income tax contributions increased by 46% year-on-year in the
third quarter of 2013, and decreased by 25% year-on-year for the nine months
of 2013. This reflects changes in profit before tax. The effective income tax
rate was 20% in the third quarter and nine months of 2013.

The Group’s net income increased by 12% year-on-year to RUB 10.5 billion in
the third quarter of 2013, and decreased by 17% year-on-year to RUB 24.2
billion for the first nine months of 2013.

The following factors had an impact on Rostelecom’s net income dynamics for
the third quarter of 2013:

  *An increase in income from broadband, pay-TV and interconnection and
    traffic transit services;
  *Reduced income in the fixed telephony segments, and also in mobile
    services, due to a lack of widespread penetration of 3G services;
  *Growth in other investing and financial income, including that associated
    with stopping the consolidation of subsidiary company Global Tel;
  *An increase in other operating income mainly due to the receipt of bonuses
    from equipment suppliers (in the form of offset payments and refunds);
  *A reduction in financial expenses largely due to the increase in
    capitalization of interest expenses relating to increasing construction
    expenses, as well as the optimisation of the interest expenses of
    subsidiary companies.

Financial Review

Net operating cash flow for the first nine months of 2013 amounted to RUB 63.0
billion.

Net cash used in investing activities during the first nine months of 2013
decreased by 9% year-on-year to RUB 52.7 billion. CAPEX decreased by 35%
year-on-year in the third quarter of 2013 and amounted to RUB 13.9 billion.
The decrease in investments in the third quarter can be attributed to CAPEX
being weighted more heavily in certain periods of the year than others and the
active management of working capital (including the optimization of tender
procedures and contractor payment terms).

The changes in net cash received from financing activities related to the
repurchase of shares from shareholders who voted against the Company’s
reorganisation.

As of 30 September, 2013, the Group’s total debt increased by 4% year-on-year
to RUB 222.6 billion. Nearly 99% of the Group’s total debt was
rouble-denominated as of 30 September, 2013.

The Group’s net debt amounted to RUB 208.3 billion as of 30 September, 2013,
with a net debt / OIBDA ratio of 1.9x.

OTHER INFORMATION: CONFERENCE CALL

Rostelecom’s management will hold a conference call today at 3.00PM (Moscow),
12.00PM (CET), 11.00 AM (UK) and 6.00 AM (NYT). To participate in the
conference call, please dial:

Russia:             +7 495 213 0979
UK/International:     +44(0)20 3427 1904
USA:                  +1 646 254 3361
Access code:          3605895
                      

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 visit http://www.rostelecom.ru/en/ir or contact:

“Rostelecom Investor Relations / Rostelecom IR” application is now available
to download for free from the Apple App Store and Google Play

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

APPENDICES

1. Reconciliation of OIBDA;

2. Accounting policy specifics affecting Rostelecom’s results for the third
quarter and nine months of 2013;

3. Statement of Comprehensive Income for the third quarter and nine months of
2013;

4. Statement of Cash Flows for the nine months of 2013;

5. Statement of Financial Position as at 30.09.2013.

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.

                      3Q        3Q       %           9M       9M       %
RUB million         2013     2012    change,   2013    2012    change,
                                         y-o-y                         y-o-y
Operating income    13,257   13,422  (1%)      37,521  46,234  (19%)
Add: Depreciation     16,141    15,992   1%          49,544   48,101   3%
and amortisation
OIBDA                 29, 398   29,414   (0%)        87,065   94,335   (8%)
OIBDA margin, %     37.6%    38.2%            37.5%   39.5%   
                                                                       

ATTACHMENT 2
ACCOUNTING POLICY SPECIFICS AFFECTING ROSTELECOM’S RESULTS FOR THE THIRD
QUARTER AND NINE MONTHS OF 2013

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

To provide stakeholders with clarity regarding the Company’s financial
position and performance with regards to its reorganisation through the merger
with OJSC Svyazinvest and 20 other companies, the Company has decided to
change 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, 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 starting
from the earliest possible comparative period.

Following the reorganisation, from the fourth quarter of 2013 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 ultimate shareholder’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 THIRD QUARTER AND NINE MONTHS OF
2013

                      Three-month period ended    Nine-month period ended
                        30                            30
                        September                   September
                        2013          2012           2013         2012
                     (unaudited)   (restated)   (unaudited)  (restated)
                                                                    
Revenue                 78,220         76,985         232,317       238,691
Operating expenses
Wages, salaries,
other benefits and      (20,157)       (19,206)       (62,653)      (61,003)
payroll taxes
Depreciation,
amortization and        (16,141)       (15,992)       (49,544)      (48,101)
impairment losses
Interconnection         (12,533)       (11,812)       (34,838)      (34,459)
charges
Materials,
utilities, repairs      (7,693)        (6,924)        (19,596)      (20,494)
and maintenance
Gain / (loss) on
disposal of
property, plant and     (167)          (257)          (127)         (540)
equipment and
intangible assets
Bad debt expense        (911)          (655)          (1,715)       (1,166)
Other operating         5,394          4,023          10,636        10,345
income
Other operating       (12,755)      (12,740)     (36,959)     (37,037)
expenses
Total operating       (64,963)      (63,563)     (194,796)    (192,455)
expenses, net
Operating profit      13,257        13,422       37,521       46,236
Income from             138            120            454           416
associates
Finance costs           (3,837)        (4,348)        (11,490)      (12,128)
Other investing and     3,536          1,485          4,391         2,693
financial gain
Foreign exchange      17            467          (526)        329
(loss) / gain, net
Profit before         13,111        11,146       30,350       37,546
income tax
Income tax expense    (2,567)       (1,761)      (6,118)      (8,211)
Profit for the        10,544        9,385        24,232       29,335
period
                                                                    
Other comprehensive
income/(loss)
Items that may be
reclassified
subsequently to
profit and loss:
Revaluation loss on
available-for-sale      333            502            (325)         (152)
investments
Revaluation gain on
available-for-sale
investments             -              9              -             (740)
transferred to
profit on sale
Exchange
differences on          (9)            (24)           39            (68)
translating foreign
operations
Income tax relating
to items that may     -             147          -            147
be reclassified
Other comprehensive
loss for the          324           484          (286)        (813)
period, net of tax
Total comprehensive
income for the        10,868        9,869        23,946       28,522
period
                                                                    
Profit attributable
to:
Equity holders of       10,515         9,300          24,294        29,215
the Group
Non-controlling         29             85             (62)          120
interests
                                                                    
Total comprehensive
income attributable
to:
Equity holders of       10,843         9,781          24,004        28,407
the Group
Non-controlling         25             88             (58)          115
interests
                                                                    
Earnings per share
attributable to
equity holders of       3.68           3.24           8.41          10.10
the Group – basic
(in Roubles)
Earnings per share
attributable to
equity holders of       3.68           3.21           8.41          10.00
the Group – diluted
(in Roubles)
                                                                    

ATTACHMENT 4
STATEMENT OF CASH FLOWS FOR THE NINE MONTHS OF 2013;

                                        Nine-month period ended 30 September
                                       2013 (unaudited)    2012 (restated)
Cash flows from operating activities                        
Profit before income tax                  30,350               37,546
Adjustments to reconcile profit
before tax to cash generated from
operations:
Depreciation, amortization and            49,544               48,101
impairment losses
(Gain) / loss on disposal of
property, plant and equipment and         127                  540
intangible assets
Bad debt expense                          1,715                1,166
Income from associates                    (454)                (416)
Finance costs excluding finance costs
on pension and other long-term social     10,937               11,428
liabilities
Other investing and financing gain        (4,391)              (2,693)
Foreign exchange gain, net                526                  (329)
Share-based payment expenses              -                    41
Changes in net working capital:
Increase in accounts receivable           (8,897)              (10,046)
Increase in employee benefits             58                   284
Decrease/(increase) in inventories        606                  (542)
Increase in accounts payable,             3,638                5,098
provisions and accrued expenses
Change in other assets and              (3,646)             (748)
liabilities
Cash generated from operations            80,113               89,430
Interest paid                             (12,466)             (11,757)
Income tax paid                         (4,682)             (4,495)
Net cash provided by operating          62,965              73,178
activities
Cash flows from investing activities
Purchase of property, plant and           (45,826)             (63,460)
equipment and intangible assets
Proceeds from sale of property, plant     899                  1,225
and equipment and intangible assets
Acquisition of financial assets           (10,147)             (3,764)
Proceeds from disposals of financial      1,565                7,991
assets
Interest received                         132                  209
Dividends received                        669                  822
Purchase of subsidiaries, net of cash     (21)                 (1,287)
acquired
Proceeds from disposal of                 (6)                  81
subsidiaries, net of cash disposed
Acquisition of equity accounting        (5)                 -
investees
Net cash used in investing activities   (52,740)            (58,183)
                                          
                                          Nine-month period ended 30 September
                                       2013 (unaudited)    2012 (restated)
Cash flows from financing activities
Sale of treasury shares                   11,093               2,224
Purchase of treasury shares               (30,299)             (21,928)
Proceeds from bank and corporate          326,948              380,463
loans
Repayment of bank and corporate loans     (344,049)            (343,289)
Proceeds from bonds                       30,000               -
Repayment of bonds                        (1,613)              (6,436)
Proceeds from promissory notes            -                    22,863
Repayment of promissory notes             -                    (22,946)
Proceeds from / (Repayment of) vendor     13                   (124)
financing payable
Repayment of other non-current            (8)                  (9)
financing liabilities
Repayment of finance lease                (571)                (1,185)
liabilities
Dividends paid to shareholders of the     (7,406)              (12,808)
Group
Dividends paid to non-controlling         (200)                (190)
shareholders of the Group
Acquisition of non-controlling          -                   (15,628)
interest
Net cash used in financing activities   (16,092)            (18,993)
                                                               
Effect of exchange rate changes on      (11)                (11)
cash and cash equivalents
Net decrease in cash and cash           (5,878)             (4,009)
equivalents
Cash and cash equivalents at            10,370              7,380
beginning of the period
Cash and cash equivalents at the end    4,492               9,396
of the period
                                                               

ATTACHMENT 5
STATEMENT OF FINANCIAL POSITION AS AT 30.09.2013;

                                        30 September 2013  31 December 2012
                                       (unaudited)        (restated)
ASSETS
Non-current assets
Property, plant and equipment             375,462             385,994
Investment property                       229                 274
Goodwill and other intangible assets      82,744              87,830
Investments in associates                 5,546               5,179
Other investments                         2,088               2,498
Deferred tax assets                       3,257               2,694
Other non-current assets                5,634              5,413
Total non-current assets                474,960            489,882
Current assets
Inventories                               3,865               4,534
Trade and other accounts receivable       42,162              33,992
Prepayments                               3,369               3,912
Prepaid income tax                        2,691               2,921
Other investments                         9,780               952
Cash and cash equivalents                 4,492               10,370
Other current assets                    1,481              1,258
Total current assets                    67,840             57,939
Total assets                            542,800            547,821
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the Group
Share capital                             106                 106
Additional paid-in capital                7,202               7,119
Treasury shares                           (56,078)            (36,615)
Retained earnings and other reserves    271,160            254,457
Total equity attributable to equity       222,390             225,067
holders of the Group
Non-controlling interests               946                493
Total equity                            223,336            225,560
Non-current liabilities
Loans and borrowings                      164,315             150,907
Employee benefits                         11,055              10,997
Deferred tax liabilities                  24,188              22,565
Accounts payable, provisions and          174                 230
accrued expenses
Other non-current liabilities           4,770              4,136
Total non-current liabilities           204,502            188,835
Current liabilities
Loans and borrowings                      58,250              63,499
Accounts payable, provisions and          48,168              59,889
accrued expenses
Income tax payable                        196                 50
Other current liabilities               8,348              9,988
Total current liabilities               114,962            133,426
Total liabilities                       319,464            322,261
Total equity and liabilities            542,800            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 9.6 million fixed-line broadband subscribers and over 6.9 million
pay-TV subscribers. As Rostelecom develops its mobile data networks, its
position as a major mobile operator is growing with over 13.8 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 232.3 billion of consolidated revenues, RUB
87.1 billion of OIBDA (37.4% of revenues) and RUB 24.2 billion of net income
for the first nine months ended September 30th, 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.

^1 Unaudited data
^2 Here and below, please refer to Attachment 1 of this statement for a full
definition of OIBDA
^3 In order 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 3Q13 includes OJSC Bashinformsvyaz and others but does not
include Rostelecom’s share in OJSC Svyazinvest’s net profit.
^4 Here and below, capital expenditure (“CAPEX”) comprises cash spent on
purchase of property, plant and equipment and intangible assets
^5 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
^6 OIBDA from the past twelve months

Contact:

Rostelecom OJSC
 
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