Rostelecom announces its IFRS financial and operating results for the first quarter of 2016

Print version 17.05.2016

Revenue grew by 1.1% to rub 72.5 billion in 1q 2016
Net profit increased by 43% to rub 3.0 billion

Moscow, Russia – May 17, 2016 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces its consolidated financial results for the first quarter of 2016 prepared in accordance with IFRS^[1].

KEY ACHIEVEMENTS

• The digital segment’s^[2] contribution to total revenue reached 42%;
• Rostelecom accounted for half of the new subscriptions achieved in the pay-TV ^[3] market;
• Total fibre optic network coverage reached 31.1 million households by the end of the first quarter of 2016;
• Strong financial results.

FIRST QUARTER 2016 FINANCIAL HIGHLIGHTS

• Revenue grew by 1.1% to RUB 72.5 billion;
• OIBDA^[4] increased by 1% and amounted to RUB 24.7 billion;
• OIBDA margin of 34.0% compared to 34.2% in the first quarter of 2015;
• Net profit increased by 43% to RUB 3.0 billion;
• CAPEX^[5] increased by 16% year-on-year to RUB 19.0 billion (26.2% of revenue) from RUB 16.3 billion (22.7% of revenue) in the first quarter of 2015;
• Consolidated Free Cash Flow (FCF) was RUB -2.4 billion compared to RUB 0.4 billion in the corresponding period of last year;
• Net debt^[6] remained relatively flat since the beginning of the year and amounted to RUB 176.5 billion, resulting in a Net Debt/OIBDA ratio of 1.7x.

Key figures for 1Q 2016

RUB million	1Q 2016	1Q 2015	% change,  y-o-y
Revenue	72,464	71,710	1.1%
OIBDA	24,670	24,492	1%
OIBDA margin %	34.0%	34.2%
Operating Income	8,502	9,269	(8%)
Operating margin %	11.7%	12.9%
Net Income	3,002	2,099	43%
% of revenue	4.1%	2.9%
Capital Expenditure	18,964	16,286	16%
% of revenue	26.2%	22.7%
Net debt	176,532	171,259	3%
Net debt/ annualised OIBDA	1.7	1.7
FCF	(2,427)	403	-

Sergei Kalugin, President of Rostelecom, commented:
We started 2016 with confidence, having achieved strong operating and financial results within the first three months of the year. This was made possible through the development of our digital services on the basis of an upgraded network infrastructure, improved customer services, and our continuing work to enhance operational efficiency. The strong momentum that we have developed will ensure the timely implementation of our strategic initiatives. For the remainder of 2016, a great deal of our attention will be spent on building business in new digital segments, in improving our organisational structure and the launch of new network infrastructure transformation programmes. I am confident that with the support of our customers, partners and shareholders, we will be able to achieve our goals and evidence continued progress towards the implementation of the Company's strategy, and ultimately at increasing the Company’s value.

Kai-Uwe Mehlhorn, Senior Vice-President and Chief Financial Officer, added:
Rostelecom has achieved growth across all major metrics during the first quarter having reported increases in revenue, OIBDA and net income. This was driven by continued increase in our pay-TV and broadband subscriber base and reflects our efforts to actively promote our digital services, including those related to the ‘Smart City’ project, geodata, data centres, and OTT products. We were also able to optimize personnel costs and make savings on materials and repairs. Based on these results we are able to confirm our forecast for 2016: we expect this year's revenue to grow by 1-2%, OIBDA to stay at a 2015 level and capital expenditure to be less than 19% of revenues (excluding the Bridging the Digital Divide project).

KEY OPERATING HIGHLIGHTS

1. The number of broadband subscribers grew by 6% year-on-year to 11.9 million in 1Q 2016;
   - The B2C subscriber base grew by 6% to 11.1 million, whilst the number of subscribers connected by fibre optic increased by 23% year-on-year to 6.6 million (56% of the subscriber base).
2. The number of pay-TV subscribers grew by 9% year-on-year to 8.8 million households.
   - The number of IPTV subscribers increased by 27% to 3.7 million.
3. The number of local telephony subscribers decreased by 8% to 21.7 million.

Number of subscribers (million):	1Q 2016	1Q 2015	% change, y-o-y	4Q 2015	% change, y-o-y
Broadband	11.9	11.2	6%	11.6	2%
Residential	11.1	10.5	6%	10.9	2%
Corporate clients	0.7	0.7	(0.6%)	0.7	1%
Pay TV	8.8	8.1	9%	8.6	2%
Incl. IPTV	3.7	2.9	27%	3.4	7%
Local telephony services	21.7	23.7	(8%)	22.1	(2%)

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