ER-Telecom Reports Its Financial Results for the First Half of 2016

ER-Telecom reports its financial results for the first half of 2016 August 29, 2016 – JSC ER-Telecom Holding, a national fixed-line telecommunications operator, announces its consolidated financial results (unaudited)1 for the first half of 2016.

Key financial and operating indicators for the first half of 2016:

 Consolidated revenues have increased by 21.4% compared to the same period last year and reached RUB 13.359 million.  EBITDA has grown by 3% over last year to RUB 4.027 million. EBITDA margin is at 30%.  Net profit has reduced by 45.6% compared to the first half of 2015 and totaled RUB 459 million.  CAPEX has increased by 2.05 times compared to the same period last year and reached RUB 3.234 million.  As of June 30, 2016, the net debt is RUB 18.060 million.  B2B-segment revenues have grown by 118% over the previous period and reached RUB 4.118 million.  The number of active subscribers in the B2C segment has grown by 7% and reached 5.409 million subscribers.

Consolidated financial indicators (in millions of Russian Rubles)

6 months of 6 months of 6 months of 2016 2015 2016/ 6 months of 2015 Revenue 13,359 11,004 21.4% B2C 9,385 9,171 2.3% B2B 3,946 1,807 118.4% EBITDA 4,027 3,910 3.0% EBITDA margin 30% 36% -5.4% Net profit 459 845 -45.6% Net profit margin 3% 8% -4.2% CAPEX 3,234 1,576 105.2% CAPEX/Revenue 24% 14% 9.9%

1 Based on consolidated interim condensed financial statements (unaudited) reviewed by JSC KPMG 1 Substantial corporate events of the first half of 2016 and after the end of the reporting period: Mergers and acquisitions  Enforta (OOO Prestige-Internet), one of the largest Russian B2B operators, became part of JSC ER-Telecom Holding.  In August 2016, JSC ER-Telecom Holding acquired 100% of OOO West Call SPb, which has assets in Saint-Petersburg, Leningrad Oblast and owns two telecom companies in Ryazan. As a result of the acquisition, new assets were added to ER- Telecom: OOO West Call SPb, OOO Credolink, OOO INFOCENTER, OOO InterTelecom and OOO Nlink Telecommunications. The acquisition will strengthen Holding’s presence in those cities.  In February 2016, JSC ER-Telecom Holding acquired a 100% interest in the equity capital of JSC Delovaya Set – Irkutsk and a 100% stake in JSC Sibirskaya telefonnaya companiya, both operating in Irkutsk. These acquisitions will enable the Group to significantly increase its market share in Irkutsk and, therefore, to become a leader in the local market. Issuance of bonds in Russian rubles  On July 07, 2016, JSC ER-Telecom Holding completed the primary placement of series PBO-01 bonds, amounting to RUB 3 billion, with a circulation period of 3 years. JSC ER-Telecom Holding approved an exchange bond program worth of up to RUB 30 billion. Loan portfolio restructuring  On August 22, 2016, JSC ER-Telecom Holding and VTB signed a supplementary agreement, under the current loan agreement totaling RUB 27 billion, to extend the loan limit availability period till the end of 2016. Rating confirmation by Standard and Poor’s (S&P)  On June 17, 2016, S&P assigned B+ rating in national and foreign currencies, the outlook is stable. Dividends  In May 2016, ER-Telecom Holding Limited, JSC ER-Telecom Holding’s sole shareholder, made a decision to distribute dividends based on the Company performance in 2014-2015 amounting to RUB 450,020 thousands. Changes in Company’s management  Viktor Ratnikov was appointed Director for federal and network clients.  Leri Gubkin was appointed Director for B2G. Reorganization  On February 08, 2016, ER-Telecom Holding Limited, JSC ER-Telecom Holding’s shareholder, made a decision on Company reorganization by merging of JSC Megapolis-Telecom, a subsidiary, into JSC ER-Telecom Holding.  On July 01, 2016, record 2165958715570 was made in the Unified State Register of Legal Entities on the reorganization of JSC ER-Telecom Holding via merger with JSC Megapolis-Telecom.  As a result of the reorganization, JSC ER-Telecom Holding became a legal successor of all rights and obligations of the merged company. Strategic partnership  On March 29, 2016, ER-Telecom entered the cellular communications market in partnership with Russia’s leading mobile operators under the Mobile Virtual Network Operator (MNVO) arrangement.  In April 2016, ER-Telecom together with Megafon launched a joint convergent project incorporating fixed-line and mobile services of both operators.

2  In August 2016, JSC ER-Telecom Holding via its subsidiary Enforta (OOO Prestige-Internet) won a tender for the provision of free of charge Wi-Fi-access within the Garden Ring in Moscow. The network will include 1,100 access points.

3 Andrey Kuzyaev, President of JSC ER-Telecom Holding, commented on the results of the first six months of 2016: Within the framework of implementation of the Company’s growth strategy in the first six months of 2016, ER-Telecom’s consolidated revenue has grown by 21.4% over 2015 and amounted to RUB 13.3 billion, which is in line with the Company’s planned targets. The revenue gain was mostly due to growth of the B2B segment including the acquisition of Enforta, which doubled the segment’s revenue. Despite strengthening of competition in the business, revenues in the B2C segment have grown by 2.3%, and the subscriber base – by 7%. We are working towards retaining and expanding our subscriber base by introducing new products and services to the market. This year we have completed a number of major M&A deals in Irkutsk, Saint-Petersburg and Ryazan. Enforta’s acquisition enabled to expand our geographical presence from 56 cities to 556 locations. These acquisitions have reinforced our position in regional markets and offered an opportunity to unite Company’s resources to implement our common innovative projects and develop new business areas: Wi-Fi-technologies and M2M-solutions. The Company’s growth strategy is backed up by diversified sources of financing. A faster revenue growing rate compared to mid-market values is due to significantly increased investments in organic growth in the cities of presence as well as M&A deals. This impacted the profitability of our business in the current period. However, we believe that by 2017 the expected synergies unlocked by our acquisitions will significantly benefit our main financial and operating performance, lower the costs and, in the long term, increase the margins of our business. Taking into account the current macroeconomic situation, the Company will not change its dividend payment plans for our shareholders in accordance with the Company’s dividend policy. Planned dividends for 2016 amounting to RUB 900 million will be paid in full until the end of the year. RUB 450 million in dividends were distributed based on the results of the first half of the year.

4 Media contacts: Nino Donadze Press Secretary JSC ER-Telecom Holding tel. +7 (499) 557 07 50 (43304) mob. +7 (+7) 909 995 95 (18) [email protected] About us JSC ER-Telecom Holding is a leading telecom services provider in Russia, founded in 2001. The Company offers its services to retail clients under its Dom.ru brand, and to corporate clients - under its Dom.ru Business brand. The services include: broadband access to Internet, digital TV, telephone communication, video surveillance, and Wi-Fi (for corporate clients).The services are provided using the Company’s own FTTH telecommunications network, built from scratch and based on common standards. According to internal estimates, the Company occupies 11% of broadband market and 12% of pay TV in Russia. In terms of the number of subscribers, the Company holds the 2-nd place among Russia’s major internet providers, and the 2-nd place among cable TV operators. The Company has won many national awards including the Runet Prize 2014 and Bolshaya Tsifra 2016 award. According to RBC’s rating “Major Russian Companies 2016”, ER-Telecom has shown the highest profit growth rate among Russia’s communications operators. Disclaimer The above analysis and comments are to be viewed taking into account the consolidated financial statements of JSC ER-Telecom Holding. Such words as “estimate”, “plan”, “expect”, “forecast” and similar expressions are used to identify forward-looking statements. Statements suggesting a forecast of future events are influenced by risk factors, uncertainty as well as other factors, which may result in the actual results being inconsistent with the original statements. JSC ER-Telecom Holding does not provide any representations and warranties regarding achievement of the performance targets expected on the basis of such forward-looking statements, which, in any single case, provide only one of many possible scenarios and should not be deemed as the most probable or standard scenario. JSC ER-Telecom Holding does not undertake any obligation to review these forward-looking statements made after publishing consolidated financial statements save as specified in the applicable legislation.