Rostelecom OJSC: ROSTELECOM BOARD OF DIRECTORS APPROVE CONTRIBUTION OF ITS MOBILE ASSETS INTO JV WITH TELE2 RUSSIA HOLDING AB UK Regulatory Announcement MOSCOW ROSTELECOM BOARD OF DIRECTORS APPROVE CONTRIBUTION OF ITS MOBILE ASSETS INTO JV WITH TELE2 RUSSIA HOLDING AB Moscow, Russia – December 12, 2013 – Rostelecom OJSC (Moscow Exchange: RTKM, RTKMP; OTCQX: ROSYY), Russia's national telecommunications operator (“Rostelecom”), approve contribution of its mobile assets into a joint venture (“T2 RTK Holding”) with Tele2 Russia Holding AB (“Tele2 Russia”), equally owned by VTB Capital, the private equity arm of VTB, one of Russia’s largest banks (“VTB”), and a consortium of investors. T2 RTK Holding will become a leading player in the Russian mobile market, with strong positions in the current regions of presence of Rostelecom and Tele2 Russia, and access to spectrum for next generation mobile services across all federal regions of Russia. T2 RTK Holding will have a pro forma subscriber base of approximately 38 million (Q3 2013), with pro forma 2012 revenues of approximately RUB 101 billion. Rostelecom mobile Tele2 Russia Regions covered¹ 35 41 Subscribers (mm)^1 14.1 23.7 Revenue (RUB bn)^2 41 60 Market share^3 6% 10% ^1 Number of regions with commercial mobile operations and mobile subscribers as of Q3 2013 ^2 Based on 2012 full year ^3 Based on number of subscribers Rostelecom will contribute substantially all of its mobile assets and licences to T2 RTK Holding, while Tele2 Russia will contribute all of Tele2 Russia’s mobile assets. The contribution from Rostelecom will be effected in two stages. The first stage will see Rostelecom contributing its standalone mobile subsidiaries and assets, including SkyLink, into T2 RTK Holding. At the end of this first stage, Rostelecom will receive a 45% voting interest and a 26% economic interest in T2 RTK Holding. During the second stage, Rostelecom will spin off its integrated mobile businesses into its new wholly owned subsidiary CJSC RT-Mobile which will be expected to have Rostelecom’s mobile licences (including the LTE licences) re-issued to it. Upon completion of the spin-off, Rostelecom will contribute its whole stake in CJSC RT-Mobile into T2 RTK Holding and increase its economic interest in T2 RTK Holding to 45%. The combination will bring substantial benefits to both parties, as well as to consumers and the entire Russian telecom sector. T2 RTK Holding plans to undertake significant investments in the development of 3G/LTE network as well as in innovative and high-quality mobile services for the benefit of Russian consumers and businesses. *T2 RTK Holding will have immediate nation-wide reach and sufficient scale to effectively compete with existing mobile operators *The combination of mobile assets will allow T2 RTK Holding to capture the imminent data growth opportunity in the Russian telecoms market by capitalising on Tele2 Russia’s know-how and impressive track record in developing mobile operations and on Rostelecom’s wide next-generation spectrum holdings *T2 RTK Holding will command superior cash flow generation potential, to the extent the combination is expected to generate significant synergies over the medium term, particularly in respect of network roll-out and operation, distribution and customer service *T2 RTK Holding will be able to offer converged fixed-mobile products across the country *Rostelecom will additionally benefit from substantial savings of mobile capital expenditures and elimination of debt related to mobile operations albeit facing relatively minor negative impact on top line This transaction represents a key milestone in the implementation of Rostelecom’s mobile strategy and reinforces Rostelecom’s presence in the mobile segment. The mobile assets of Rostelecom and Tele2 Russia offer a great strategic fit, complementing each other in terms of footprint and allowing T2 RTK Holding to capitalise on Tele2 Russia’s know-how across the segments, proven track record of innovation and Rostelecom’s next-generation spectrum holdings. Rostelecom substantially enhances its exposure to Russia’s fast growing mobile data market through its strategic interest in a larger and faster growing operator, capable of effectively competing with the major players in the market. The transaction was approved by Rostelecom’s board of directors and is subject to regulatory approvals as well as other customary conditions precedent. It is anticipated that the first stage of the transaction will close in Q1 2014. The second stage of the transaction will be subject to the completion of Rostelecom reorganisation in the form of a spin-off, aimed at carving out the integrated mobile businesses. Such reorganisation requires Rostelecom shareholder approval, and a general meeting of Rostelecom shareholders to approve such a reorganisation has been scheduled for December 30, 2013. The second stage is expected to complete in the first half of 2014. Sergey Kalugin, President of Rostelecom commented: “We are delighted to have reached an agreement with Tele2 Russia to create a new national mobile operator, with tremendous growth opportunities and exciting prospects. With support from both shareholders, T2 RTK Holding is set to be a story of great success.” Credit Suisse and J.P. Morgan Limited acted as financial advisors to Rostelecom on the transaction. Barclays issued a fairness opinion. Linklaters served as counsel to Rostelecom. VTB Capital and UBS acted as financial advisors to Tele2 Russia shareholders, while Skadden served as counsel to Tele2 Russia. * * * 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 firstname.lastname@example.org * * * 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 9.8 million fixed-line broadband subscribers and over 7.0 million pay-TV subscribers. As Rostelecom develops its mobile data networks, its position as a major mobile operator is growing with over 14.1 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 (37.5% 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. Contact: Rostelecom OJSC
Rostelecom OJSC: ROSTELECOM BOARD OF DIRECTORS APPROVE CONTRIBUTION OF ITS MOBILE ASSETS INTO JV WITH TELE2 RUSSIA HOLDING AB
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