3rd Quarter Results

MOSCOW--()--

ROSTELECOM REPORTS IFRS CONSOLIDATED FINANCIAL RESULTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2012

Rostelecom OJSC (the “Group” and the “Company”) (MICEX - RTS: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announced its unaudited IFRS consolidated1 financial results for the third quarter and nine months ended September 30, 2012.

NINE MONTHS FINANCIAL HIGHLIGHTS

  • Consolidated revenues up 8% year-on-year to RUB 238.7 billion
  • OIBDA2 up 8% year-on-year to RUB 94.0 billion with an OIBDA margin of 39.4% compared to 39.2% for the same period of 2011
  • Net income up 13% year-on-year to RUB 30.6 billion
  • Capital expenditure3 of RUB 63.5 billion, representing 26.6% of consolidated revenues
  • Net debt of RUB 197.6 billion with a net debt / annualised OIBDA ratio of 1.6x as at September 30, 2012.

THIRD QUARTER FINANCIAL HIGHLIGHTS

  • Consolidated revenues up 2% year-on-year to RUB 77.0 billion
  • OIBDA of RUB 29.4 billion with an OIBDA margin of 38.2%
  • Net income up 8% year-on-year to RUB 9.9 billion
  • Capital expenditure of RUB 21.6 billion, representing 28.1% of consolidated revenues

KEY OPERATING HIGHLIGHTS

  • Total number of households passed reached 33.4 million4, of which 15.7 million (47%) were passed using FTTx technology
  • Total broadband subscriber base up 12% year-on-year to 8.9 million
  • Total Pay TV subscriber base increased by 11% year-on-year to 6.4 million, of which 1.2 million are interactive TV subscribers.

Alexander Provotorov, President of Rostelecom, commented: “We continue to deliver on our strategy, which was approved by the Board in May 2011. During the third quarter, we were actively involved in the construction of our mobile networks in selected regions, primarily where Rostelecom already has mobile operations or uses frequency licences obtained through the acquisition of Sky Link, which was completed at the end of July. Following the test launch of our first 3G network in the Irkutsk region, the mobile data traffic in the region increased by 1.5 times. This clearly indicates that we are moving in the right direction to meet our clients’ needs. Our successful participation in the LTE licence tender process was also among the key developments of the third quarter“.

Anton Khozyainov, Senior Vice President of Rostelecom, added: “During the nine months to September 30, 2012, our top line grew 8% year-on-year to RUB 238.7 billion the, OIBDA margin increased to 39.4% and net income grew 13% year-on-year to RUB 30.6 billion. In addition, in early November, we increased the share of our long-term debt by placing bonds with a total value of RUB 10 billion. This was the first time the united Rostelecom has issued bonds since the start of the reorganisation process in 2011. Rostelecom’s strong credit ratings and the high demand for our bonds from investors enabled us to achieve attractive terms for this offering and to set the coupon at 8.55% per annum.”

CONSOLIDATION AND INCLUSION OF SKY LINK CJSC FINANCIAL RESULTS

The acquisition of Sky Link CJSC (“Sky Link”) is the 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 period in which Sky Link was acquired under common control of the Group’s majority shareholder. The comparative information, which is presented in the current financial statements, has therefore been restated from the date that Sky Link was acquired by Svyazinvest, i.e. Oct 4, 2010.

FINANCIAL SUMMARY

      %       %
RUB million 3Q 2012 3Q 2011 change, 9M 2012 9M 2011 change,
            y-o-y           y-o-y
Revenue 76,985 75,250 2% 238,691 221,838 8%
OIBDA 29,426 30,060 (2%) 93,972 86,858 8%
OIBDA margin, %   38.2%   39.9%       39.4%   39.2%    
Operating income 13,434 14,775 (9%) 45,871 41,779 10%
Operating margin, %   17.5%   19.6%       19.2%   18.8%    
Net income 9,902 9,203 8% 30,626 27,038 13%
Net margin, %   12.9%   12.2%       12.8%   12.2%    
Capital expenditure 21,602 15,902 36% 63,460 42,647 49%
% of revenue   28.1%   21.1%       26.6%   19.2%    
Net debt 197,593 147,226 34% 197,593 147,226 34%
Net debt/annualised OIBDA   1.6х   1.3х       1.6х   1.3х    

OPERATING REVIEW

Revenue structure by services5

      %       %
RUB million 3Q 2012 3Q 2011 change, 9M 2012 9M 2011 change,
            y-o-y           y-o-y
 
Local telephony services 21,125 21,615 (2%) 64,448 66,107 (3%)
Intra-zone telephony services 4,568 5,287 (14%) 14,085 16,261 (13%)
DLD/ILD telephony services 4,863 5,633 (14%) 15,404 17,782 (13%)
Interconnection and traffic transit services 5,418 5,635 (4%) 15,453 14,757 5%
Broadband Internet 12,367 11,391 9% 36,911 34,330 8%
Pay TV 2,394 1,716 40% 6,592 4,847 36%
Mobile communication services 10,512 10,284 2% 30,989 30,340 2%
Data services (VPN, data centres, wholesale Internet sales) 5,149 4,874 6% 15,101 13,597 11%
Rent of channels 3,014 2,746 10% 8,826 7,558 17%
Other   7,575   6,069   25%   30,882   16,259   90%
Total revenue   76,985   75,250   2%   238,691   221,838   8%

Revenue structure by customer segments

      %       %
RUB million 3Q 2012 3Q 2011 change, 9M 2012 9M 2011 change,
            y-o-y           y-o-y
Residential customers 40,163 40,700 (1%) 121,924 124,084 (2%)
Corporate customers 16,844 17,191 (2%) 50,364 49,630 1%
Governmental customers 10,191 8,101 26% 38,601 23,488 64%
Operators 9,787 9,258 6% 27,802 24,636 13%
Total revenue   76,985   75,250   2%   238,691   221,838   8%

The Company reported a 2% year-on-year increase in revenue to RUB 77.0 billion in the third quarter, which reflected:

  • an increase in revenues from cloud and IT solutions and from infrastructure rental as part of other revenues
  • broadband revenue growth which was in line with an increase in subscriber base
  • Pay TV revenue growth reflecting an increase in subscriber base.

This growth was partially offset by a decline in revenues from Domestic Long Distance and International Long Distance and intrazonal telephony services, which primarily reflected on-going changes in usage patterns for traditional fixed-line services.

Rostelecom reported an 8% year-on-year increase in revenues to RUB 238.7 billion for the first nine months of 2012. The year-on-year growth primarily reflected an increase in revenues from cloud and IT solutions and infrastructure rental as part of other revenues, and higher revenues from broadband and Pay TV services driven by increases in their respective subscriber bases.

Key operating indicators

Number of Subscribers       % change,     % change,
(millions):   3Q 2012   3Q 2011   y-o-y   2Q 2012   y-o-y
Household passed incl 33.4 30.9 8% 33.1 1%
FTTх 15.7 11.9 32% 14.8 6%
Local telephony 27.5 28.8 (4%) 27.8 (1%)
Mobile 13.5 13.3 2% 13.5 0.4%
Broadband Internet access incl. 8.9 7.9 12% 8.6 3%
Residential 8.2 7.3 13% 8.0 3%
Corporate 0.6 0.6 8% 0.6 2%
Pay TV incl. 6.4 5.8 11% 6.2 3%
IPTV   1.2   0.5   120%   1.0   21%
 

Traffic, generated by residential and corporate subscribers6 (billions of minutes)

Intra-zone 2.3 2.7 (13%) 2.4 (5%)
DLD 1.1 1.2 (13%) 1.2 (7%)
ILD   0.1   0.1   (14%)   0.1   (4%)

The total broadband subscriber base grew by 12% year-on–year and by 3% quarter-on–quarter to 8.9 million users, while the total Pay TV subscriber base increased by 11% year-on–year and by 3% quarter-on-quarter to reach 6.4 million subscribers. This reflected an increase in IPTV subscriber base which more than doubled year-on-year and grew 21% quarter-on-quarter.

The number of mobile subscribers increased by 2% year-on-year to 13.5 million, when including Sky Link Group’s subscribers. The year-on-year increase in subscriber base can be attributed to marketing and promotional activities related to Rostelecom’s mobile offering. Rostelecom’s total subscriber base for local telephony services decreased both year-on-year and quarter-on-quarter, as a result of on-going changes in customer preferences towards mobile communications.

OPERATING EXPENSES7 STRUCTURE

RUB million       % change,       % change,
    3Q 2012   3Q 2011   y-o-y   9M 2012   9M 2011   y-o-y
Personnel costs 19,327 18,371 5% 61,366 59,396 3%
Interconnection charges 11,812 11,521 3% 34,459 29,966 15%
Materials, repairs and maintenance, utilities 7,134 7,039 1% 20,998 20,605 2%
Other operating income (4,023) (2,961) 36% (10,345) (10,173) 2%
Other operating expenses   13,309   11,220   19%   38,241   35,186   9%
Total   47,559   45,190   5%   144,719   134,980   7%

The Company’s total operating expenses, excluding depreciation and amortisation, increased by 5% year-on-year to RUB 47.6 billion in the third quarter of 2012. The increase primarily reflected:

  • а 19% year-on-year increase in other operating expenses to RUB 13.3 billion, which is attributable to higher property tax and increased expenses attributable to SKY LINK prior to its acquisition by the Group.
  • a 5% year-on-year increase in personnel costs to RUB 19.3 billion.

The Company’s total operating expenses, excluding depreciation and amortisation, increased by 7% year-on-year to RUB 144.7 billion for the first nine months of 2012.

The Company reported OIBDA of RUB 29.4 billion in the third quarter and OIBDA of RUB 94.0 billion for the nine months of 2012, with OIBDA margins of 38.2% and 39.4%, respectively.

Depreciation and amortisation expenses increased by 5% year-on–year to RUB 16.0 billion in the third quarter and by 7% year-on-year to RUB 48.1 billion for the year-to-date. This was in line with expenditure requirements for the video surveillance project and the commissioning of new fixed assets.

Rostelecom’s capital expenditure increased by 36% year-on-year to RUB 21.6 billion in the third quarter and by 49% year-on–year to RUB 63.5 billion for the nine months of 2012. The increase in CAPEX is the result of work carried out to upgrade and build channels for the video surveillance project, the modernisation of broadband networks and IT systems, as well as the launch of new services and the construction of Rostelecom’s 3G infrastructure.

The Company reported an operating profit of RUB 13.4 billion in the third quarter and RUB 45.9 billion for the nine months of 2012, with operating margins of 17.5% and 19.2%, respectively.

Other expenses were flat year-on-year in the third quarter of 2012. The year-on-year increase in financial expenses which was attributable to an increase in total debt, was fully offset by an increase in the Group’s equity participation in Svyazinvest and Bashinformsvyaz’s earnings and a foreign exchange gain.

Profit before tax remained stable year-on-year at RUB 11.6 billion in the third quarter and increased by 12% year-on-year to RUB 39.3 billion for the nine months of 2012.

The Company’s income tax contributions decreased by 28% year-on-year to RUB 1.7 billion in the third quarter and increased by 6% year-on–year to RUB 8.7 billion for the nine months of 2012, which reflected changes in profit before tax.

Rostelecom’s effective tax rate was 14.9% in the third quarter and 22.1% for the nine months of 2012. The third quarter effective tax rate was lower than the statutory rate due to the recognition of a one-off deferred tax asset on Sky Link’s losses.

The Company reported an 8% year-on-year increase in net income to RUB 9.9 billion in the third quarter and a 13% year-on-year increase to RUB 30.6 billion for the nine months of 2012.

FINANCIAL REVIEW

Net cash generated by operating activities increased by 16% year-on-year for the nine months of 2012 and amounted to RUB 73.2 billion.

Cash used in investing activities decreased by 21% year-on-year to RUB 58.2 billion for the nine months of 2012, mainly as a result of the acquisition of a 71.8% stake in NTK in the first quarter of 2011.

The year-on-year decrease in cash provided by financing activities as at the end of the first nine months of 2012 was mainly due to the acquisition of 3.86% of Rostelecom ordinary shares by Mobitel (“Mobitel”) and the acquisition of a 28.2% stake in NTK.

The Group’s total borrowings, including current and non-current obligations, amounted to RUB 201.6 billion as at September 30, 2012. Over 98% of the Group’s total debt was ruble-denominated at the end of the third quarter.

The Group’s net debt therefore amounted to RUB 197.6 billion, equivalent to 1.6x annualised OIBDA.

SIGNIFICANT EVENTS RELATING TO THE THIRD QUARTER OF 2012 AND AFTER THE END OF THE REPORTING PERIOD

Business news

  • According to the results of a Roskomnadzor tender for the allocation of LTE-standard licences, Rostelecom was awarded licences within the 791-798.5MHz band and 832-839.5MHz band to roll-out its LTE network, which can be further modified to provide 4G services
  • Rostelecom announced that over 8,000 base stations will be installed in 27 regions as part of the first stage of building a modern multi-standard mobile network. The network will offer all the advantages of existing technologies which are used to provide 2G, 3G and 4G wireless services
  • Rostelecom launched its first 3G network in the Irkutsk region. Mobile data traffic has multiplied 1.5 times since the network’s test launch
  • Rostelecom commissioned an Oracle-based Hyperion unified budgeting solution, which will help draw new budgets and provide further control functions for its divisions in all 8 marco regions
  • Rostelecom announced that its broadband subscriber base now exceeds 9 million users as at the beginning of November 2012. Rostelecom remains the leader of the Russian broadband market with a 40% market share8, which is almost 4 times more than its nearest competitor
  • Rostelecom appointed CJSC “Sberbank CIB”, VTB Capital CJSC and Gazprombank OJSC to organise the Group’s potential bond placement. The issue is expected to raise a total nominal value of RUB 100 billion
  • Rostelecom set the coupon for the Series 17 bonds at 8.55% per annum, with a period of 182 days. The bonds, totalling a nominal value of RUB 10 billion, have a three-year put option from placement and a maturity of 5 years.

Reorganisation

  • An EGM of Svyazinvest shareholders passed a resolution on July 29, 2012, to increase the company’s share capital by issuing additional shares, which was proposed by the company’s Board. The shares were offered as part of a private placement to existing Svyazinvest shareholders. Rostelecom will pay cash for the additional shares, while the State, represented by the Federal Property Management Agency, will purchase its additional stake by transferring to Svyazinvest its ordinary shares in OJSC Bashinformsvyaz, JSC Ingushelektrosvyaz, JSC Chukotkasvyazinform, OJSC MMTS-9, as well as its ordinary and Class A preferred shares in JSC Central Telegraph
  • Svyazinvest held an extraordinary general meeting of shareholders on October 10, 2012. The EGM approved an inter-party transaction agreement to purchase additional shares as stipulated between the Russian state represented by the Federal Property Management Agency and Svyazinvest
  • Rostelecom's Board of Directors approved the acquisition of 140,315,416 additional ordinary nominal book-entry shares in Svyazinvest.

M&A

  • Rostelecom completed the acquisition of a 100% stake in Sky Link. As part of the deal, Mobitel LLC, a subsidiary of Rostelecom, acquired a 50% stake in Sky Link from Svyazinvest in exchange for 1.91% of Rostelecom ordinary shares. As a result, Mobitel’s effective ownership in Sky Link now amounts to 100%. The 1.91% stake in Rostelecom was valued at RUB 9.4 billion, or RUB 167 per share
  • Rostelecom Board of Directors approved selling Rostelecom’s 2.95% stake in SMARTS ordinary shares back to SMARTS
  • AMT CJSC and Westelecom JSC, wholly-owned subsidiaries of Rostelecom, acquired 100% shares in Chita-on-Line Ltd, one of the largest alternative operators in Chita, from private investors.

Other

  • A consortium which includes the Russian Institute of Directors and rating agency Expert RA confirmed Rostelecom's national corporate governance rating at the level of "8", which corresponds to “Developed Corporate Governance Practice” on the National Corporate Governance Scale.
  • A Russian rating agency "Reputation" assigned Rostelecom its first Corporate social responsibility rating of "AA (s)".

OTHER INFORMATION

Conference call

Rostelecom will host a conference call today at
7.00 AM (ET) / 12.00 PM (UK) / 1.00 PM (CET) / 4.00 PM (MOSCOW)

To participate in the conference call, please dial:

Russia +7 495 580 9543
UK/ International: +44 208 515 2319
US: +1 480 629 9819

A replay of the conference call will be available on the Company’s website http://www.rostelecom.ru/en/ir/results_and_presentations/financials/2012/ in due course.

FOR MORE INFORMATION PLEASE CONTACT:

IR department
Tel. +7 (499) 995-97-80
ir@rt.ru

1 Q1 2011 financial results include contributions from North-West Telecom OJSC, CenterTelecom OJSC, Southern Telecommunications Company OJSC, VolgaTelecom OJSC, Uralsvyazinform OJSC, Sibirtelecom OJSC, Far East Telecom OJSC (“RTOs”), and also Dagsvyazinform OJSC and Rostelecom OJSC (under RAS), which had been under common control of Svyazinvest OJSC and were merged with Rostelecom on April 1, 2011. Operating activities include contributions from Sky Link CJSC, which was acquired by Rostelecom from Svyazinvest on July 27, 2012

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

3 Here and below, capital expenditure (“CAPEX”) comprises cash spent on purchase of property, plant and equipment and intangible assets

4 Calculated as the sum of total number of households passed by xDSL, FTTx and xPON technologies, excluding technology intersections.

5 Effective from April 1, 2011, the methodological changes in the revenue structure include the following: 1) revenue from DLD/ILD traffic transit, which were previously included in the “DLD / ILD telephony services” reporting line, are now included in the “Interconnection and traffic transit services” reporting line; 2) revenue from mobile interconnection services, previously included in the “Interconnection and traffic transit services” reporting line, are now presented under "Mobile Communication Services"; 3) other methodological changes had no significant impact on the reporting structure.

6 Excluding traffic, generated by other telecom operators

7 Excluding depreciation and amortisation

8 Source: ACM-Consulting

ATTACHMENTS:

1. Reconciliation of OIBDA;
2. Statement of Comprehensive Income for the three and nine months ended September 30, 2012 and 2011
3. Statement of Cash Flows for the nine months ended September 30, 2012 and 2011
4. Statement of Financial Position

ATTACHMENT 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. OIBDA should not be considered in isolation as an alternative to net income, operating income or any other measure of performance under U.S. GAAP or IFRS.

      %       %
RUB million 3Q 3Q change, 9M 9M change,
    2012   2011   y-o-y   2012   2011   y-o-y
Operating income 13,434 14,775 (9%) 45,871 41,779 10%
Add: Depreciation and amortisation 15,992 15,285 5% 48,101 45,079 7%
OIBDA 29,426 30,060 (2%) 93,972 86,858 8%
OIBDA margin, %   38.2%   39.9%       39,4%   39.2%    
 

ATTACHMENT 2
STATEMENT OF COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012

  Three -month periods ended September 30   Nine -month periods ended September 30
    2012

(unaudited)

  2011

(unaudited)

  2012

(unaudited)

  2011

(unaudited)

     
Revenue 76,985 75,250 238,691 221,838
Operating expenses
Wages, salaries, other benefits and payroll taxes (19,327) (18,371) (61,366) (59,396)
Depreciation, amortization and impairment losses (15,992) (15,285) (48,101) (45,079)
Interconnection charges (11,812) (11,521) (34,459) (29,966)
Materials, utilities, repairs and maintenance (7,134) (7,039) (20,998) (20,605)
Gain/(loss) on disposal of property, plant and equipment and intangible assets (257) (381) (540) (967)
Bad debt (expense) recovery (521) (494) (1,166) (462)
Other operating income 4,023 2,961 10,345 10,173
Other operating expenses   (12,531)   (10,345)   (36,535)   (33,757)
Total operating expenses, net   (63,551)   (60,475)   (192,820)   (180,059)
Operating profit   13,434   14,775   45,871   41,779
Income from associates 1,259 932 3,486 2,737
Finance costs (4,398) (3,497) (12,164) (10,265)
Other investing and financial gain 860 956 1,791 1,426
Foreign exchange (loss)/gain, net   479   (1,572)   324   (482)
Profit before income tax   11,634   11,594   39,308   35,195
Income tax expense   (1,732)   (2,391)   (8,682)   (8,157)
Profit for the period   9,902   9,203   30,626   27,038
 
Other comprehensive (loss) / income
Revaluation (loss)/ gain on available-for-sale investments 502 (456) (152) (174)
Revaluation gain on available-for-sale investments transferred to profit on sale 9 - (740) -
Exchange differences on translating foreign operations (24) - (68) -
Share of other comprehensive income recognized by associates 31 (11) (63) (11)
Income tax in respect of other comprehensive loss/ (gain) income items   (103)   92   178   35
Other comprehensive (loss)/ income for the period, net of tax   415   (375)   (845)   (150)
Total comprehensive income for the period   10,317   8,828   29,781   26,888
 
Profit attributable to:
Equity holders of the Group 9,817 9,381 30,506 27,192
Non-controlling interests 85 (178) 120 (154)
 
Total comprehensive income attributable to:
Equity holders of the Group 10,237 9,006 29,666 27,042
Non-controlling interests 80 (178) 115 (154)
 
Earnings per share attributable to equity holders of the Group – basic (in Roubles) 3.13 3.27 10.55 9.48
Earnings per share attributable to equity holders of the Group – diluted (in Roubles) 3.11 3.21 10.45 9.32
 

ATTACHMENT 3
STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

  Nine-month periods ended 30 September
    2012 (unaudited)   2011 (unaudited)
Cash flows from operating activities  
Profit before income tax 39,308 35,195
Adjustments to reconcile profit before tax to cash generated
from operations:
Depreciation, amortization and impairment losses 48,101 45,079
Loss on disposal of property, plant and equipment and intangible assets 540 967
Bad debt expense 1,166 462
Income from associates (3,486) (2,737)
Finance costs excluding finance costs on pension and other long-term social liabilities 11,464 9,263
Other investing and financing gain (1,791) (1,426)
Foreign exchange (gain)/ loss, net (324) 482
Share-based payment expenses 41 513
Changes in net working capital:
Increase in accounts receivable (10,046) (3,854)
Increase in employee benefits 647 1,029
Increase in inventories (542) (1,287)
Increase/(decrease) in accounts payable, provisions and accrued expenses 5,098 (4,965)
(Decrease)/increase in other assets and liabilities   (748)   2,664
Cash generated from operations 89,428 81,385
Interest paid (11,757) (9,544)
Income tax paid   (4,495)   (8,995)
Net cash provided by operating activities   73,176   62,846
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets (63,460) (42,647)
Proceeds from sale of property, plant and equipment and intangible assets 1,225 752
Acquisition of financial assets (3,764) (5,456)
Proceeds from disposals of financial assets 7,991 8,041
Interest received 209 1,472
Dividends received 822 193
Purchase of subsidiaries, net of cash acquired (1,287) (32,285)
Proceeds from disposal of subsidiaries, net of cash disposed 81 -
Acquisition of equity accounting investees   -   (3,640)
Net cash used in investing activities   (58,183)   (73,570)
 
  Nine-month periods ended 30 September
    2012 (unaudited)   2011 (unaudited)
Cash flows from financing activities  
Purchase of treasury shares (21,928) (6)
Sale of treasury shares 2,224 -
Proceeds from bank and corporate loans 380,463 167,438
Repayment of bank and corporate loans (343,289) (150,061)
Proceeds from bonds - 12
Repayment of bonds (6,436) (8,398)
Proceeds from promissory notes 22,863 13,490
Repayment of promissory notes (22,946) (14,840)
Repayment of vendor financing payable (124) (323)
Repayment of other non-current financing liabilities (9) 54
Repayment of finance lease liabilities (1,185) (2,398)
Dividends paid to shareholders of the Group (12,808) (113)
Dividends paid to non-controlling shareholders of subsidiaries (190) (303)
Acquisition of non-controlling interest   (15,628)   (366)
Net cash (used in)/ provided by financing activities   (18,993)   4,186
 
Effect of exchange rate changes on cash and cash equivalents   (11)   (15)
 
Net increase decrease in cash and cash equivalents   (4,011)   (6,553)
Cash and cash equivalents at beginning of the period   7,380   12,694
Cash and cash equivalents at the end of the period   3,369   6,141
 

ATTACHMENT 4
STATEMENT OF FINANCIAL POSITION

   
30 September 2012 31 December 2011
    (unaudited)    
ASSETS
Non-current assets
Property, plant and equipment 358,260 335,205
Investment property 186 259
Goodwill and other intangible assets 86,778 88,937
Investments in associates 34,726 34,746
Other investments 2,691 3,635
Deferred tax assets 510 1,127
Other non-current assets   14,549   13,562
Total non-current assets   497,700   477,471
Current assets
Inventories 5,316 4,763
Trade and other accounts receivable 35,834 28,790
Prepayments 4,445 2,706
Prepaid income tax 1,753 3,309
Other investments 656 3,926
Cash and cash equivalents 3,369 7,380
Other current assets   2,838   1,276
Total current assets   54,211   52,150
Total assets   551,911   529,621
EQUITY AND LIABILITIES
Equity attributable to equity holders of the Group
Share capital 106 106
Additional paid-in capital 34,842 34,739
Treasury shares (36,707) (17,164)
Retained earnings and other reserves   253,529   247,928
Total equity attributable to equity holders of the Group 251,770 265,609
Non-controlling interests   438   7,784
Total equity   252,208   273,393
Non-current liabilities
Loans and borrowings 127,655 90,806
Employee benefits 12,399 11,752
Deferred tax liabilities 21,067 20,699
Accounts payable, provisions and accrued expenses 124 85
Other non-current liabilities   4,014   3,689
Total non-current liabilities   165,259   127,031
Current liabilities
Loans and borrowings 73,963 81,464
Accounts payable, provisions and accrued expenses 50,860 39,196
Income tax payable 937 242
Other current liabilities   8,684   8,295
Total current liabilities   134,444   129,197
Total liabilities   299,703   256,228
Total equity and liabilities   551,911   529,621

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Rostelecom (www.rostelecom.ru) is Russia’s largest national telecommunications operator with presence in all Russian regions. The Group is a universal operator and undisputable leader of broadband and pay-TV markets in Russia with over 9 million fixed-line broadband subscribers and over 6 million pay-TV subscribers. As Rostelecom develops its mobile data networks, its position as a major mobile operator is growing with over 13 million currently subscribed to Rostelecom’s mobile voice services. The Company currently has approximately 28 million local fixed-line voice subscribers and it is the leader in the corporate and government services segment. The Group is also an important innovator that provides solutions in the field of medicine, E-Government, cloud computing and education.

Rostelecom was assigned a ‘BBB-’ and ‘BB+’ international credit ratings by Fitch Ratings and Standard & Poor’s respectively, both with a ‘Stable’ outlook. The Group generated RUB 238.7 billion of consolidated revenues, RUB 94.0 billion of OIBDA (39.4% of revenues) and RUB 30.6 billion of net income for the nine months ended September 30, 2012.

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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.

Short Name: Rostelecom OJSC
Category Code: QRT
Sequence Number: 352824
Time of Receipt (offset from UTC): 20121121T060552+0000

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