Rostelecom OJSC: Rostelecom’s Board of Directors Approves a New Stock Option Plan for Its Management Team

  Rostelecom OJSC: Rostelecom’s Board of Directors Approves a New Stock Option
  Plan for Its Management Team

UK Regulatory Announcement


                               MANAGEMENT TEAM

Moscow, Russia – March 31, 2014 –Rostelecom OJSC (MOEX: RTKM, RTKMP; OTCQX:
ROSYY), Russia’s national telecommunications operator, today announces that at
its meeting on 31 March, 2014, Rostelecom’s Board of Directors approved the
Company’s long-term incentive plan for its management.

The programme provides for the launch of a share option plan for ordinary
shares, which can be purchased by the programme’s participants through an
annual bonus payments system. Annual bonuses are paid in accordance with

The programme will last for three years and approximately 200 senior and
mid-ranking managers will participate in the programme, including the heads of
regional branches.

The long-term key performance indicators (KPIs) used to determine awards
within this programme are as follows: free cash flow (FCF), net profit and
return on invested income (ROIC).

The collective base package of all the participants of the programme will
consist of ordinary shares amounting to 1.5% of the company’s share capital.
The total size of the package depends on how well key performance indicators
(KPIs) are met and is limited to 200% of the total block of shares in the
event that KPIs are significantly over-fulfilled. If there is a significant
failure to meet specified KPIs, programme participants will lose the right to
exercising the option in the reporting period in question.

Shares will be sold to each participant in the option programme on an annual
basis as a percentage of the collective share package making adjustments for
whether or not KPIs are met: 30% for 2014, 30% for 2015 and 40% for 2016.
Vesting also occurs in stages: 50% upon completion of the financial year and
50% twelve months afterwards.

In order to implement this stock option plan, a close-ended mutual fund will
be created and run by a professional employee stock option plan manager.
Treasury shares amounting to 3% of the company’s share capital will be added
to the fund.

Sergey Kalugin, President of Rostelecom, commented: “The long-term incentive
programme that has been approved by the Board is primarily aimed at attracting
talented and professional managers. It is also designed to make managers more
interested in raising the Company’s fundamental value and capitalisation and
this brings the expectations of shareholders and potential investors in line
with the interests of Rostelecom’s key employees.”

                                    * * *

For more information please visit 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

                                    * * *

Rostelecom ( 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 10.6 million fixed-line broadband subscribers and over 7.5 million
pay-TV subscribers. The Group is also an important innovator that provides
solutions in the field of medicine, E-Government, cloud computing and

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 325.7 billion of consolidated revenues, RUB
113.3 billion of OIBDA (34.8% of revenues) and RUB 24.1 billion of net income
for the 12 months ended December 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
  *the Company’s plans with respect to improving its corporate governance
  *the Company’s expectations as to its position in the telecommunications
    market and the development of the market segments within which the Company
  *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.


Rostelecom OJSC
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