Rostelecom OJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE FIRST QUARTER 2014 UK Regulatory Announcement MOSCOW ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE FIRST QUARTER 2014 Moscow, Russia – May 27, 2014 – Rostelecom OJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces its consolidated financial results for the first quarter of 2014^1 prepared in accordance with IFRS. FIRST QUARTER 2014 FINANCIAL HIGHLIGHTS When analysing the first quarter results, it is important to consider the following: - the completion of the first stage of the deal to create a JV with Tele2 Russia^2, 3; - the consolidation of the results of OJSC Svyazinvest and its subsidiaries^2, 4; - the separation of results from continuing operations and discontinued operations based on the decision to create a JV with Tele2 Russia^2. *Consolidated Group revenues were up 1% year-on-year to RUB 80.4 billion for the first quarter of 2014 while revenues from continued operations (fixed business) increased by 4% to RUB 73.2 bln; *OIBDA^5 amounted to RUB 26.5 billion compared to RUB 29.4 billion in the corresponding period of 2013; *OIBDA margin of 33% (37% in the first quarter of 2013); *Net income increased by 8% year-on-year to RUB 6.9 billion; *Capital expenditure^6 decreased by 60% year-on-year to RUB 10 billion (12.4% of revenue); *Net debt^7 of RUB 184 billion as at March 31 2014, with a net debt/OIBDA ratio of 1.7x; *Net cash from operating activities of RUB 22.7 billion with free cash flow of RUB 12.7 billion. RUB million 1Q 14 1Q 13 % change, y-oy Revenue 80,406 79,559 1% OIBDA 26,497 29,430 (10%) OIBDA margin, % 33.0% 37.0% Operating income 11,983 11,565 4% Operating margin, % 14.9% 14.5% Net income 6,892 6,392 8% % of revenue 8.6% 8.0% Capital expenditure 9,959 25,112 (60%) % of revenue 12.4% 31.6% Net debt 184,013 203,215 (9%) Net debt/annualised OIBDA 1.7 1.8 Sergey Kalugin, President of Rostelecom, commented: “We demonstrated stable financial and operating results in the first quarter of 2014. The Company continued to expand its broadband and IPTV subscriber bases during the first quarter of 2014, and we were also able to increase both revenue and profit while reducing our debt burden. The key achievements during the first quarter include completing the first stage of the deal to create a joint venture with Tele2 Russia, and signing two notable state contracts, one on providing video surveillance during the Unified State Exam worth RUB 600 million, and one on bridging the digital gap in the Russian regions by handling a RUB 163 billion federal government project. We are also pleased that our Board of Directors has recommended that shareholders approve a higher level of dividend per share. We also continue to develop and improve our service offering, increase income and focus on maximising internal efficiency.” Kai-Uwe Mehlhorn, Senior Vice-President and Chief Financial Officer, added: “The results for the first quarter were in line with our expectations. The 1.1% increase in revenue growth for the first quarter coincided with an 8% increase in profits and we successfully replaced falling fixed voice income with revenue streams from fast-growing segments such as broadband, pay-TV, innovative services, and public sector projects. There are clear signals that we are improving our operating efficiency and we are on track to meeting our target for this year of reducing our operating expenses by RUB 5 billion. As part of our on-going strategic initiatives, the management team’s efforts are focused on expanding our income base and improving internal efficiency. These initiatives will not only help us to balance inflation risks and enhance our competitive position, they will also support our profitability level at a time of increased contribution from lower margin services as our pay TV and broadband businesses grow.” KEY OPERATING HIGHLIGHTS *The number of broadband subscribers grew 8% year-on-year to 10.8 million; *The B2C subscriber base grew by 8% to 10 million, while the number of subscribers connected by fibre optic increased by 28% year-on-year to 4.3 million (40% of the subscriber base). *The pay-TV subscriber base grew by 8% year-on-year to 7.6 million; *The number of IPTV subscribers increased by 33% to 2.3 million *The number of mobile subscribers increased by 9% year-on-year to 14.8 million. Number of subscribers 1Q 2014 1Q 2013 % change, 4Q 2013 % change, (million) y-o-y y-o-y Local telephony 26.0 27.8 (6%) 26.5 (2%) services Mobile communication 14.8 13.6 9% 14.8 0.2% services Broadband Internet 10.8 10.0 8% 10.6 2% Residential 10.0 9.2 8% 9.8 2% Corporate clients 0.7 0.7 5% 0.7 1% Pay-TV 7.6 7.1 8% 7.5 1% IPTV 2.3 1.7 33% 2.2 6% SIGNIFICANT EVENTS RELATING TO THE FIRST QUARTER 2014 AND AFTER THE END OF THE REPORTING PERIOD Business News *Rostelecom and Tele2 Russia signed a framework agreement that will see the integration of their respective mobile assets; *Rostelecom successfully acted as Sochi Olympic and Paralympic Games general partner; *Rostelecom’s Board of Directors approved a new management option programme; *The first stage of the deal to create a JV with Tele2 Russia was completed; *Rostelecom signed two notable state contracts: *RUB 600 million contract with the Federal Education and Science Supervision Agency to provide video surveillance for the Unified State Exam in 2014; *A 10-year, RUB 163 billion state contract with the Federal Communications Agency , aimed at bridging the digital gap; *Rostelecom launched a company-wide Programme focused on improving Operational Efficiency; *Rostelecom’s shareholders elected a new Board of Directors at the EGM and also approved amendments to the Company’s charter; *Rostelecom’s Board of Directors set June 30, 2014 as the date for the Annual General Shareholders’ Meeting, and recommended dividend payments for 2013. The dividends are to be paid as follows: *RUB 4.848555414552 per Class A preferred share; *The dividend per ordinary share is calculated as follows: the total sum of RUB 8,824 mln, excluding the accrued dividends on the Class A preferred shares, is divided by the amount of Rostelecom ordinary shares outstanding as at July 14, 2014 (excluding the treasury shares on Rostelecom’s balance sheet). *The Company launched new IPTV bundles and offerings ; *The first multiplex system was made available for Rostelecom’s OTT customers; *New content services were developed, including an exclusive offer on the Paramount Channel, the addition of new TV channels, unlimited film storage and access to BRAIN GAMES; and *Rostelecom further developed the Europe-Asia transit project by constructing an additional section. Reorganisation (spinning-off the mobile assets into RT-Mobile) *Rostelecom acquired 6.1% of its ordinary shares and 13.7% of its preferred shares as a result of the obligatory buyback from those shareholders who voted against the Company’s reorganisation. Other News *The ratings agency Standard and Poor’s affirmed Rostelecom’s credit rating of BB+ with a stable outlook. OPERATING REVIEW Revenue Analysis Revenue structure by services RUB million 1Q 2014 1Q 2013 % change, y-o-y Local telephony services 20,992 21,730 (3%) Intra-zone telephony services 3,762 4,231 (11%) DLD/ILD telephony services 3,969 4,695 (15%) Interconnection and traffic transit 6,325 5,554 14% services Broadband Internet 14,991 13,520 11% Pay-TV 3,425 2,787 23% Mobile communication services 9 ,239 9,503 (3%) Data services (VPN, data centres, 5,853 5,349 9% wholesale Internet sales) Rent of channels 2,527 3,335 (24%) Other revenue 9,324 8,854 5% Total revenue 80,406 79,559 1% Revenue structure by customer segments RUB million 1Q 2014 1Q 2013 % change, y-o-y Residential customers 41,570 41,958 (1%) Corporate customers 18,235 17,949 2% Governmental customers 10,408 10,607 (2%) Operators 10,193 9,044 13% Total revenue 80,406 79,559 1% Revenue grew by 1% year-on-year in the first quarter of 2014 and amounted to RUB 80.4 billion. This was influenced by the following factors: *11% revenue growth from broadband services as a result of an expanded subscriber base (an increase of RUB 1.5 billion); *14% revenue growth from data transfer services by attracting additional traffic volumes from other operators (an increase of RUB 0.8 billion); *23% revenue growth in pay-TV services due to an expanded subscriber base in the IPTV segment (an increase of RUB 0.6 billion). Revenue dynamics were impacted by declining revenue from international, inter-city, intra-zonal and local telephony services. This is due to changes in end-users’ preferences in how telephone calls are made and the migration of the corresponding traffic to mobile operators’ networks. Operating Income Analysis Operating expenses structure (excluding amortization) RUB million 1Q 2014 1Q 2013 % change, y-o-y Personnel costs 23,989 23,021 4% Interconnection charges 12,691 10,355 23% Materials, repairs and maintenance, 6,922 6,228 11% utilities Other operating income (2,569) (2,739) (6%) Other operating expenses 12,876 13,264 (3%) Total operating expenses 53,908 50,128 8% In the first quarter of 2014, operating expenses excluding amortization grew by 8% year-on-year to RUB 53.9 billion. This was influenced by the following factors: *A 23% year-on-year increase in interconnection charges to RUB 12.7 billion, which can be attributed to expanding the B2B and B2O business segments, which is accompanied by income growth, and increased content fees in relation the growing number of Pay TV subscribers; *A 4% year-on-year increase in personnel costs to RUB 24.0 billion due to the insourcing of a number of functions (the transfer of contracted agency staff to in-house employment to generate savings), along with one-off additional staff expenses relating to the Olympic and Paralympic Games in Sochi; *An 11% year-on-year increase in materials, repairs and utilities expenses to RUB 6.9 billion following a rise in utility tariffs and equipment installation charges, as well as the introduction of new facilities following the extension of our network. In the first quarter of 2014, OIBDA reached RUB 26.5 billion, compared to RUB 29.4 billion in the corresponding period of 2013. The OIBDA margin in the first quarter of 2014 was 33%, in contrast to 37% in 2013. In the first quarter of 2014, depreciation and amortisation expenses decreased by 19% compared to the corresponding period of 2013 and amounted to RUB 14.5 billion. The decrease in amortisation expenses is due to the absence of amortisation expenses on mobile assets that are to be transferred to the JV with Tele2 Russia (in accordance with IFRS rule 5). The Company’s operating income for the first quarter of 2014 increased by 4% and amounted to RUB 12 billion. Net Income Analysis Profit before tax grew by 11% in the first quarter of 2014 and amounted to RUB 9.2 billion. The following had an impact on gross profit in the first quarter of 2014: *Income generated from the disposal of Rostelecom’s mobile business, which is reflected in the other operating income and expenses items; *An increase in financial expenses driven by lower levels of compounded interest expenses being capitalised compared to the first quarter of 2013; and *FX losses due to the weakening rouble. Income tax in the first quarter of 2014 rose by 24% year-on-year to RUB 2.3 billion. The effective income tax rate was 25%, compared to the 20% rate specified by the Tax Code. The higher effective tax rate in the first quarter of 2014 was due to the non-accrual of tax (failure to deduct for tax purposes) on some expenses. The Group’s net profit increased by 8% in the first quarter of 2014 and amounted to RUB 6.9 billion. Financial Review Net operating cash flow grew by 5% year-on-year in the first quarter of 2014 and amounted to RUB 22.7 billion. Free cash flow amounted to RUB 12.7 billion in the first quarter of 2014, compared to - RUB 3.5 billion for the corresponding period of 2013. Net cash used in investing activities fell by 68% in the reporting quarter to RUB 8.2 billion. Investments amounted to RUB 10 billion, a decrease of 60% compared to the corresponding period of 2013. The decrease in investments in the first quarter of 2014 was down to management’s policy of improving the effectiveness of investment activities, which includes optimising tender procedures and relationships with suppliers. The fact that the CAPEX programme is implemented unevenly across the calendar year also contributed to this reduction. The changes in net cash received from financing activities are related to the repurchase of shares from shareholders who voted against the Company’s reorganisation. In the first quarter of 2014, the Group’s net debt fell by 6% from the beginning of 2014 to RUB 214.7 billion. This reduction can be attributed to the transfer of part of the Company`s debt to the JV with Tele2 Russia, and to the repayment of a number of loans. More than 99% of the Group’s total debt was rouble-denominated as at March 31, 2014. As at March 31, 2014, the Group’s net debt amounted to RUB 184 billion with a net debt / OIBDA ratio of 1.7x. OTHER INFORMATION: CONFERENCE CALL Rostelecom’s management will hold a conference call today at 6.00PM (Moscow), 4.00PM (CET), 3.00 PM (UK) and 10.00 AM (NYT). To participate in the conference call, please dial: Russia: +7 495 705 9450 UK/International: +44(0)20 3427 1917 USA: +1 646 254 3365 Access code: 6213811 A replay of the conference call will be available on the Company’s website at http://www.rostelecom.ru/ir/results_and_presentations/financials/IFRS/2014/ 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 email@example.com APPENDICES 1. Reconciliation of OIBDA; 2. Accounting policy specifics affecting Rostelecom’s results for the first quarter of 2014; 3. Statement of Comprehensive Income for the first quarter of 2014; 4. Statement of Cash Flows for the first quarter of 2014; 5. Statement of Financial Position as at the first quarter of 2014. APPENDIX 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. RUB million 1Q 2014 1Q 2013 % change, y-o-y Operating income 11,983 11,565 4% Plus depreciation and amortisation 14,514 17,865 (19%) OIBDA 26,497 29,430 (10%) OIBDA margin, % 33.0% 37.0% APPENDIX 2: ACCOUNTING POLICY SPECIFICS AFFECTING ROSTELECOM’S RESULTS FOR THE FIRST QUARTER OF 2014 1. Reorganisation through mergers The reorganisation in the form of merging OJSC Svyazinvest and 20 other companies (either directly or indirectly controlled by Rostelecom and/or Svyazinvest) 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 date at which common control of the acquired company was established. For this reason, the comparative information, which is presented in the current financial statements, has therefore been revised to include data of the merged companies. 2. Spinning off the mobile business In relation to Rostelecom Board of Directors’ decision to create a joint venture with Tele2 Russia by contributing its mobile assets to the JV, T2 RUS Holding, and following the EGM’s approval on 30 December to spin off its integrated mobile assets into CJSC RT-Mobile, the Company presents results from continuing and discontinued operations separately in accordance with IFRS 5. The Group’s continuing operations results are presented as if the mobile business was deconsolidated on the reporting date. Intergroup transactions between continuing and discontinued operations are not excluded from the continuing operations, but are presented as turnover from third parties. The results from the discontinued operations present the sum of the results of the mobile business operations and the losses from eliminating intergroup operations. A full transcript of the components can be found in Note 2 of the Group’s consolidated IFRS financial statements. Upon completion of the first stage of the deal, Rostelecom received 45% of the voting rights, and 26% of the economic share of T2 RUS Holding. The investment in T2 RUS Holding is reflected in Rostelecom’s consolidated IFRS financial statement dated March 31, 2014 as an investment in an associated company. The initial recognition of the investment is made on value, which is based on the fair value of the assets, which were transferred to T2 RUS Holding’s share capital. The fair value of the transferred assets was determined by an independent auditor and amounted to RUB 26,874 billion. Subsequent investments will be reflected in the financial results using the equity method in accordance with IFRS 28. APPENDIX 3: STATEMENT OF COMPREHENSIVE INCOME FOR THE FIRST QUARTER OF 2014 Three-month period ended 31 March 2014 (unaudited) Continuing Effect from operations discontinued Total operations* Revenue 73,155 7,251 80,406 Operating expenses Wages, salaries, other benefits and payroll (22,752) (1,237) (23,989) taxes Depreciation, amortization and (13,877) (637) (14,514) impairment losses Interconnection charges (12,328) (363) (12,691) Materials, utilities, (6,405) (517) (6,922) repairs and maintenance Loss on disposal of property, plant and (69) (23) (92) equipment and intangible assets Bad debt expense (899) (112) (1,011) Other operating income 2,555 14 2,569 Other operating (9,634) (2,139) (11,773) expenses Total operating (63,409) (5,014) (68,423) expenses, net Operating profit 9,746 2,237 11,983 Income from associates 11 - 11 Finance costs (4,114) (70) (4,184) Other investing and (833) 2,518 1,685 financial gain/(loss) Foreign exchange loss, (162) (96) (258) net Profit/(loss) before 4,648 4,589 9,237 income tax Income tax expense (2,271) (74) (2,345) Profit/(loss) for the 2,377 4,515 6,892 period Other comprehensive income/(loss) Items that may be reclassified subsequently to profit and loss: Exchange differences on translating foreign 78 - 78 operations Other comprehensive income for the period, 78 - 78 net of tax Total comprehensive income/(loss) for the 2,455 4,515 6,970 period Profit/(loss) attributable to: Equity holders of the 2,353 4,513 6,866 Group Non-controlling 24 2 26 interests Total comprehensive income/(loss) attributable to: Equity holders of the 2,442 4,513 6,955 Group Non-controlling 13 2 15 interests Earnings/(loss) per share attributable to equity holders of the 1.02 1.94 2.96 Group – basic (in Roubles) Earnings/(loss) per share attributable to equity holders of the 1.02 1.94 2.96 Group – diluted (in Roubles) Three-month period ended 31 March 2013 (restated) Continuing Effect from operations discontinued Total operations* Revenue 70,580 8,979 79,559 Operating expenses Wages, salaries, other benefits and (21,748) (1,273) (23,021) payroll taxes Depreciation, amortization and (15,648) (2,217) (17,865) impairment losses Interconnection (9,056) (1,299) (10,355) charges Materials, utilities, repairs and (5,756) (472) (6,228) maintenance Gain / (loss) on disposal of property, 89 (154) (65) plant and equipment and intangible assets Bad debt expense (538) 60 (478) Other operating 2,716 23 2,739 income Other operating (10,229) (2,492) (12,721) expenses Total operating (60,170) (7,824) (67,994) expenses, net Operating profit 10,410 1,155 11,565 Income from 9 - 9 associates Finance costs (3,696) (277) (3,973) Other investing and 850 (22) 828 financial gain/(loss) Foreign exchange (122) (18) (140) loss, net Profit before income 7,451 838 8,289 tax Income tax (2,175) 278 (1,897) (expense)/benefit Profit for the period 5,276 1,116 6,392 Other comprehensive income/(loss) Items that may be reclassified subsequently to profit and loss: Exchange differences on translating (13) - (13) foreign operations Other comprehensive loss for the period, (13) - (13) net of tax Total comprehensive 5,263 1,116 6,379 income for the period Profit attributable to: Equity holders of the 5,219 1,114 6,333 Group Non-controlling 57 2 59 interests Total comprehensive income attributable to: Equity holders of the 5,206 1,114 6,320 Group Non-controlling 57 2 59 interests Earnings per share attributable to equity holders of the 2.00 0.42 2.42 Group – basic (in Roubles) Earnings per share attributable to equity holders of the 1.99 0.42 2.41 Group – diluted (in Roubles) * DISCONTINUED OPERATIONS The following table illustrates information about consolidated income statement of a discontinued operations for the year ended 31March 2014, 2013. Three-month period ended 31 March 2014 Discontinued Intragroup Total operations transactions Revenue 10,394 (3,143) 7,251 Operating expenses Wages, salaries, other benefits (1,237) - (1,237) and payroll taxes Depreciation, amortisation and (637) - (637) impairment losses Interconnection charges (3,007) 2,644 (363) Materials, utilities, repairs and (519) 2 (517) maintenance Loss on disposal of property, (23) - (23) plant and equipment Doubtful debt allowance (112) - (112) Other operating income 14 14 Other operating (expenses)/income (2,635) 496 (2,139) Total operating (expenses)/income, (8,156) 3,142 (5,014) net Operating profit/(loss) 2,238 (1) 2,237 Finance (costs)/income (643) 573 (70) Other investing and financial 10,064 (7,546) 2,518 losses Foreign exchange loss, net (96) (96) Profit/(loss) before income tax 11,563 (6,974) 4,589 Income tax expense (74) - (74) Profit/(loss) for the period 11,489 (6,974) 4,515 Three-month period ended 31 March 2013 Discontinued Intragroup Total operations transactions Revenue 10,075 (1,096) 8,979 Operating expenses Wages, salaries, other benefits (1,273) - (1,273) and payroll taxes Depreciation, amortisation and (2,217) - (2,217) impairment losses Interconnection charges (2,167) 868 (1,299) Materials, utilities, repairs and (479) 7 (472) maintenance Loss on disposal of property, (154) - (154) plant and equipment Reversal of doubtful debt 60 - 60 allowance Other operating income 19 4 23 Other operating (expenses)/income (2,715) 223 (2,492) Total operating (expenses)/income, (8,926) 1,102 (7,824) net Operating profit 1,149 6 1,155 Finance (costs)/income (723) 446 (277) Other investing and financial 526 (548) (22) gains/(losses) Foreign exchange (loss)/income, (20) 2 (18) net Profit/(loss) before income tax 932 (94) 838 Income tax benefit 278 - 278 Profit/(loss) for the period 1,210 (94) 1,116 APPENDIX 4: STATEMENT OF CASH FLOWS FOR THE FIRST QUARTER OF 2014 Three-month period ended 31 March Notes 2014 (unaudited) 2013 (restated) Cash flows from operating activities Profit before income tax 9,237 8,289 Adjustments to reconcile profit before tax to cash generated from operations: Depreciation, amortization and 14,514 17,865 impairment losses Loss on disposal of property, plant and equipment and 92 65 intangible assets Bad debt expense 1,011 478 Income from associates (11) (9) Finance costs excluding finance costs on pension and other 3,993 3,789 long-term social liabilities Other investing and financial (1,685) (828) gain Foreign exchange loss, net 258 140 Changes in net working capital: Increase in accounts receivable (1,721) (3,456) Increase in employee benefits 81 48 (Increase)/decrease in (864) 298 inventories Increase in accounts payable, 5,234 3,255 provisions and accrued expenses Decrease in other assets and (2,074) (1,614) liabilities Cash generated from operations 28,065 28,320 Interest paid (4,322) (4,023) Income tax paid (1,036) (2,648) Net cash provided by operating 22,707 21,649 activities Cash flows from investing activities Purchase of property, plant and (9,959) (25,112) equipment and intangible assets Proceeds from sale of property, plant and equipment and 290 315 intangible assets Acquisition of financial assets (121) (2,061) Proceeds from disposals of 1,508 4,332 financial assets Interest received - 3 Dividends received 65 - Purchase of subsidiaries, net of - (21) cash acquired Net cash used in investing (8,217) (22,544) activities Three-month period ended 31 March Notes 2014 (unaudited) 2013 (restated) Cash flows from financing activities Sale of treasury shares 815 1,170 Purchase of treasury shares (13,773) (2,820) Proceeds from bank and corporate 81,999 97,473 loans Repayment of bank and corporate (85,273) (125,494) loans Proceeds from bonds - 25,000 Repayment of bonds - (398) Proceeds from promissory notes 7 - Repayment of promissory notes (7) - Repayment of vendor financing (2) (3) payable Repayment of other non-current (2) (3) financing liabilities Repayment of finance lease - (291) liabilities Acquisition of non-controlling - (20) interest Dividends paid to shareholders of (10) (67) the Group Net cash used in financing (16,246) (5,453) activities Effect of exchange rate changes 46 6 on cash and cash equivalents Net decrease in cash and cash (1,710) (6,342) equivalents Cash and cash equivalents at 7,960 13,629 beginning of the period Cash and cash equivalents at the 6,250 7,287 end of the period APPENDIX 5: STATEMENT OF FINANCIAL POSITION AS AT THE FIRST QUARTER OF 2014 31 March 2014 31 December 2013 (unaudited) ASSETS Non-current assets Property, plant and equipment 327,111 335,059 Investment property 114 113 Goodwill and other intangible assets 59,278 64,346 Investments in associates 27,802 918 Other investments 700 520 Deferred tax assets 347 276 Other non-current assets 3,677 3,990 Total non-current assets 419,029 405,222 Current assets Inventories 4,511 3,941 Trade and other accounts receivable 46,383 39,824 Prepayments 3,818 3,508 Prepaid income tax 4,802 4,894 Other investments 24,387 1,966 Cash and cash equivalents 6,250 7,960 Other current assets 720 609 Total current assets 90,871 62,702 Held for sale assets 31,365 93,048 Total assets 541,265 560,972 EQUITY AND LIABILITIES Equity attributable to equity holders of the Group Share capital 97 97 Additional paid-in capital 1,624 1,658 Treasury shares (81,311) (68,325) Retained earnings and other reserves 293,156 262,967 Total equity attributable to equity 213,566 196,397 holders of the Group Non-controlling interests 3,350 3,359 Total equity 216,916 199,756 Non-current liabilities Loans and borrowings 177,528 184,600 Employee benefits 9,855 9,774 Deferred tax liabilities 27,802 26,728 Accounts payable, provisions and accrued 2,421 1,077 expenses Other non-current liabilities 5,268 5,127 Total non-current liabilities 222,874 227,306 Current liabilities Loans and borrowings 37,123 33,209 Accounts payable, provisions and accrued 51,150 73,635 expenses Income tax payable 41 69 Other current liabilities 6,762 9,350 Total current liabilities 95,076 116,263 Held for sale liabilities 6,399 17,647 Total liabilities 324,349 361,216 Total equity and liabilities 541,265 560,972 * * * Rostelecom (www.rostelecom.ru) is one of the largest national telecommunications operators in Russia and Europe. The Group operates in all segments of the telecommunications market and covers more than 34 million households. Rostelecom is an undisputable leader of the broadband and pay-TV markets in Russia with over 10.8 million fixed-line broadband subscribers and over 7.6 million pay-TV subscribers. The Group generated RUB 80.4 billion of consolidated revenues, RUB 26.5 billion of OIBDA (33.0% of revenues) and RUB 6.9 billion of net income for the first three months ended March 31, 2014. The Group is a market leader in providing telecommunications services to government bodies and corporates of all levels. It is also an important innovator that provides solutions in the field of medicine, E-Government, cloud computing, education, security and housing & utility services. Rostelecom was assigned ‘BBB-’ and ‘BB+’ international credit ratings by Fitch Ratings and Standard & Poor’s respectively. * * * 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 The data for the first quarter of 2013 is a combination of the consolidated results of OJSC Rostelecom (according to IFRS), OJSC Svyazinvest and its subsidiary companies, which were merged with Rostelecom on October 1, 2013 ^2 Refer to Appendix 2 ^3 The 1Q 2014 IFRS financial results for the subsidiary companies transferred to the JV are fully included in Rostelecom Group’s consolidated results for the first quarter of 2014 (profit and loss statement, cash flow statement). However, the Group’s consolidated balance sheet as at March 31, 2014 does not include the figures of the subsidiary companies transferred to the JV. ^4 Telecomcentre, OJSC Central Telegraph, CJSC Open Telecom, OJSC Giprosvyaz, OJSC Ingushelectrosvyaz, OJSC Chukotkasvyazinform, OJSC Bashinformsvyaz,,LLC Bashtelecomservice, LLC Bashtelecomleasing, LLC Bashtelecominvest, LLC Sterlitamak Building Service, OJSC Bashkortostan Mobile Network, OJSC Ufa Plant “Promsvyaz”, OJSC Moscow Inter-city Telephone Station No. 9 (MMTS-9) ^5 Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA ^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 total debt less cash, cash equivalents and short-term investments Contact: Rostelecom OJSC
Rostelecom OJSC: ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE FIRST QUARTER 2014
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