Rostelecom announces its ifrs financial and operating results for the third quarter and first nine months of 2015

Print version 11.11.2015

The digital segment increased its share of overall revenue to 40%

Operating expenses decreased by 3%, resulting in a strong OIBDA margin of 34.7%

Moscow, Russia – November 11, 2015 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces its consolidated financial results for the third quarter and nine months of 2015 prepared in accordance with IFRS.

KEY ACHIEVEMENTS

• The digital segment[1] increased its share of overall revenue to 40%;
• Total fibre optic network coverage of 29.5 million households in the third quarter of 2015;
• Operating expenses down 3% year-on-year;
• Strong third quarter OIBDA margin of 34.7%.

THIRD QUARTER 2015 FINANCIAL HIGHLIGHTS

Here and below the numbers for 2014 refer to continuing operations unless stated otherwise.

• Revenue of RUB 72.5 billion compared to RUB 74.8 billion in the third quarter of 2014;
• OIBDA[2] amounted to RUB 25.2 billion compared to RUB 26.2 billion in the third quarter of 2014;
• OIBDA margin of 34.7% compared to 35.0% in the corresponding period of last year;
• Net profit of RUB 2 billion compared to RUB 5 billion in the third quarter of 2014;
• CAPEX[3] increased by 44% year-on-year to RUB 16.0 billion (22.0% of revenue) from RUB 11.1 billion (14.8% of revenue) in the third quarter of 2014;
• Consolidated Free Cash Flow (FCF[4]) increased by 72% year-on-year to RUB 6.4 billion;
• Net debt[5] decreased by 4% year-on-year and amounted to RUB 174.9 billion, resulting in a Net Debt / Annualised OIBDA ratio of 1.7x.

Key figures for the third quarter of 2015

RUB million	3Q 2015	3Q 2014	% change, y-o-y
Revenue	72,496	74,764	(3%)
OIBDA	25,182	26,160	(4%)
OIBDA margin %	34.7%	35.0%
Operating income	9,945	10,799	(8%)
Operating margin %	13.7%	14.4%
Net income	2,046	4,971	(59%)
% of revenue	2.8%	6.6%
Capital expenditure	15,978	11,067	44%
% of revenue	22.0%	14.8%
Net debt	174,899	181,917	(4%)
Net debt/ annualised OIBDA	1.7	1.8

NINE MONTHS 2015 FINANCIAL HIGHLIGHTS

• Revenue of RUB 216.3 billion compared to RUB 220.0 billion in the corresponding period of last year;
• OIBDA amounted to RUB 75.0 billion compared to RUB 77.5 billion in the nine months of 2014;
• OIBDA margin of 34.7% compared to 35.2% in the nine months of 2014;
• Net profit amounted to RUB 10.3 billion compared to RUB 15.1 billion in the corresponding period of 2014;
• CAPEX increased by 34% year-on-year to RUB 43.4 billion (20.1% of revenue) compared to RUB 32.3 billion (14.7% of revenue) in the nine months of 2014;
• Consolidated FCF amounted to RUB 12.9 billion compared to RUB 16.2 billion in the nine months of 2014.

Key figures for the first nine months of 2015

RUB million	9M 2015	9M 2014	% change, y-o-y
Revenue	216,336	220,007	(2%)
OIBDA	75,027	77,509	(3%)
OIBDA margin, %	34.7%	35.2%
Operating income	29,329	32,382	(9%)
Operating margin, %	13.6%	14.7%
Net income	10,274	15,147	(32%)
% of revenue	4.7%	6.9%
Capital expenditure	43,383	32,301	34%
% of revenue	20.1%	14.7%
Net debt	174,899	181,917	(4%)
Net debt/ annualised OIBDA	1.7	1.8

Sergei Kalugin, President of Rostelecom, commented:

“In the third quarter we continued to develop our digital segment by increasing our broadband and pay-TV subscriber bases, whilst promoting value-added services.

Rostelecom’s Board of Directors approved a new business development strategy during the quarter, which identified the most promising and fast-growing segments, including IoT, data centres, OTT video, cloud services and geodata. Our launch of ‘Interactive TV 2.0’, a service that can be used by customers of other networks, is an example of how we can grow our subscriber base by going beyond our network. We expect each of these areas to provide additional impetus to our future revenue growth.

We continue to enhance our management team and we are pleased to welcome Valery Ermakov as Head of B2B and B2G services. As a specialist with extensive experience in the industry, he will be instrumental in bringing the B2B / B2G segment to a new level."

Kai-Uwe Mehlhorn, Senior Vice-President and Chief Financial Officer, added:

“We maintain tight control of operating expenses, which fell by 3% in the reporting period. This allowed us to sustain a high OIBDA margin, despite a significant decline in fixed line revenues. As the fourth quarter is a traditionally stronger period for revenues, we expect to maintain a stable level of revenue compared to last year, although the complex macro-environment has forced us to be more conservative. We, therefore, adjust our revenue guidance for 2015, which we expect to be at the same level or slightly lower than 2014. As for CAPEX, we see room for improvement and we expect a CAPEX to revenue ratio of less than 20%. Our margin outlook remains unchanged.”

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