The largest digital services provider in Russia

Rostelecom announces resolutions of its Board of Directors

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Moscow, Russia – October 8, 2015 – Rostelecom PJSC (“the Company”) (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, announces that a meeting of its Board of Directors took place today. This was the first time the new Board of Directors has met in person and a number of important resolutions were made, including:

· The creation of a dedicated SPV to manage the Company’s real estate

This SPV will develop and implement the Company’s strategy to monetise vacant real estate by managing, developing and selling property to interested investors. Rostelecom will transfer real estate to be sold and leased to the SPV, as well as property that needs to be redeveloped and re-launched.

Managing real estate as an independent asset will accelerate the process of monetising the portfolio and will also help to attract standalone investors to the SPV’s projects.

The funds the Company will receive from selling and renting out property will increase its free cash flow and could be used towards paying dividends, reducing its leverage and investing in infrastructure.

Rostelecom’s property portfolio currently comprises approximately 22,800 sites with a total area of over 9 million sq. m. Over half this total area is located in towns with over 100,000 inhabitants.

· A review of the strategic opportunities available to the Company in new market segments

The Company’s main goal over the coming years is to transition to the model of an integrated digital services provider, which offers the market platforms for both its own and third-party digital services.

Besides developing the traditional segments of the business, such as broadband and pay-TV, the Company intends to build its presence in new markets with high growth potential. In addition to its substantial expertise, the Company has the necessary infrastructure and client base to realise the growth potential of these market segments. The key growth areas in the new services segment include:

- Data centres;
- Cloud services;
- Over-the-top (OTT) video;
- Industrial Internet of Things;
- Geodata

By successfully entering new markets, the Company will ensure its revenue grows at a stronger pace in the future.

Rostelecom plans to disclose more detailed information around the exact development plans it has for each segment at a later date.

· The approval of the Company’s proposal to deny senior management any remuneration for working on the Management Board

Removing additional remuneration for working on the Management Board will help to optimise the senior management incentive system and will also enhance the level of corporate governance.

· The approval of the composition of the Board’s committees and the election of their leaders

The Strategy Committee is to be headed by A. Milyukov, the Audit Committee by V. Semenov, the Human Resources and Remuneration Committee by R. Aganbegyan, the Corporate Governance Committee by V. Sergeichuk and the Investments Committee by A. Auzan.

· The recognition of the necessity to conclude a shareholder agreement between the Federal Agency for State Property Management (Rosimushchestvo) and LLC MOBITEL

The Board of Directors also reviewed other issues related to the Company’s activity.