The largest digital services provider in Russia

Rostelecom announces its IFRS financial and operating results for the fourth quarter and full year of 2014

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Fixed line revenue grew by 3% y-o-y in FY 2014, with consolidated net profit increasing by 57%

Moscow, Russia – March 16, 2014 - Rostelecom OJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces its consolidated financial results for the fourth quarter and the full year of 2014 prepared in accordance with IFRS.

FULL YEAR 2014 FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS FOR CONTINUING OPERATIONS (FIXED LINE BUSINESS)

· Revenue, OIBDA margin and CAPEX[1] are in line with management guidance for 2014;

· Revenue from continuing operations grew by 3% year-on-year to RUB 298.9 billion;

· OIBDA[2] amounted to RUB 102.5 billion compared to RUB 104.1 billion in 2013;

· OIBDA margin of 34.3% compared to 35.8% in 2013;

· Capital expenditure of RUB 53.8 billion (18.0% of revenue), a 2% year-on-year increase (CAPEX represented 18.2% of revenue in 2013);

· FCF[3] increased by 27% year-on-year to RUB 21.9 billion;

· Net debt[4] reduction of 18% year-on-year to RUB 171.1 billion;

· Net income of RUB 13.2 billion compared to RUB 26.7 billion in 2013, due mainly to the paper revaluation of financial instruments and goodwill revaluation in 2014, as well as the high base effect in 2013, linked to the deconsolidation of JSC GlobalTel; whereas consolidated net income rose by 57% to RUB 37.8 billion.

CONSOLIDATED RESULTS

The transfer of Rostelecom’s mobile assets to the joint venture (“JV”) with Tele2 Russia had the following impact on the Company’s consolidated results:

· The consolidated results for the full year 2014 include the operating results of the Company’s mobile subsidiaries for the first three months of 2014 (January- March), and CJSC RT-Mobile results for the first seven months of the year (January-July);

· In the third quarter of 2014 after the deal with Tele2 Russia was completed, Rostelecom received a one-off gain of RUB 22 billion reflecting fair valuation of investments into the JV;

Full press-release

[1] Here and below, capital expenditure (“CAPEX”) comprises cash spent on fixed assets and intangible assets;

[2] Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA;

[3] Here and below, FCF is calculated as free cash flow from operating activity minus CAPEX

[4] Here and below, net debt is calculated as total debt less cash, cash equivalents and short-term investments.