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Investor Presentation 1Q 2014

Investor Presentation 1Q 2014

Investor Presentation 1Q 2014

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By attending any meeting where this presentation is made, or by reading any part of this presentation, you acknowledge and agree to be bound by the following: § This presentation has been prepared by OJSC Rostelecom (the “Company”). This presentation is strictly confidential to the recipient, may not be distributed to the press or any other person, and may not be reproduced in any form, in whole or in part. § The Company has included its own estimates, assessments, adjustments and judgments in preparing certain market information herein, which have not been verified by an independent third party. Market information included herein is, therefore, unless otherwise attributed exclusively to a third party source, to a certain degree subjective. While the Company believes that its own estimates, assessments, adjustments and judgments are reasonable and that the market information prepared by the Company appropriately reflects the industry and the markets in which it operates, there is no assurance that the Company’s own estimates, assessments, adjustments and judgments are the most appropriate for making determinations relating to market information. § Neither the Company nor any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation. § This presentation is confidential and does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the Company or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity in any jurisdiction. Neither this presentation nor any part thereof, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. § This presentation is not intended for publication or circulation in the United States. This presentation does not constitute and should not be construed as an offer to sell or the solicitation of an offer to buy securities in the United States or to any U.S. person (as defined in Regulation S under the US Securities Act of 1933 (the “Securities Act”)). No securities of the Company have been, nor will be, registered under the Securities Act or the securities laws of any state of the United States, and unless so registered may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. This presentation does not constitute a public offering or an advertisement of securities in the Russian Federation and does not constitute an offer or a proposal to make offers or to acquire any securities in the Russian Federation. § In any member state of the European Economic Area, this Presentation is made to and directed only at persons who are qualified investors within the meaning of article 2(1)(e) of the Prospectus Directive (2003/71/EC) (“Qualified Investors”). In addition, in the United Kingdom, this Presentation is made to and directed at: (i) investment professionals falling within article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) and (ii) high worth individuals, and other persons to whom it may lawfully be communicated, falling within article 49(2)(A) to (D) of the Order (such persons together with Qualified Investors, being “Relevant Persons”). In these jurisdictions, persons who are not Relevant Persons must not rely on or act upon the information contained in this presentation or any of its contents. Any investment or investment activity to which this Presentation relates is only available to Relevant Persons and will be engaged in only with Relevant Persons. The recipients of the information contained herein should not base any behavior that would amount to market abuse for the purposes of the Financial Services and Markets Act 2000 (“FSMA”) and the Code of Market Conduct made pursuant to the FSMA on the information in this Presentation or any information provided or discussed in connection with it. § This presentation is not directed at, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. Persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions.

2 www.rostelecom.ru Content

1 Rostelecom overview

2 Corporate and financial highlights

3 Rostelecom strategy update

4 Creating T2-RTK Holding - national mobile player

5 Appendix

3 www.rostelecom.ru 1. Rostelecom overview

4 www.rostelecom.ru Rostelecom Today

§ Rostelecom networks and services cover all Federal districts of , including § Strong market positions in most of the telecom segments Leading Universal operator § 69%1 market share in fixed voice § 41%1 market share in fixed Broadband § 62%1 market share in IPTV

~ 500,000 km of national backbone and unique “last mile” infrastructure with Unique infrastructure almost 34 mln households passed

26,01 mln fixed – line subs, 10.81 mln broadband subs, 7.61 mln pay-TV subs Strong subscriber base and 14.81 mln mobile voice subs

Revenue1q2014 : RUR 80.4 bln Net Income1q2014 : RUR 6.9 bln Positive Financial Results OIBDA1q2014 : RUR 26.5 bln Cash CAPEX1q2014 : RUR 10.0 bln OIBDA margin1q2014: 33.0% Net debt/OIBDA31.03.2014: x1.7

§ Currently traded on § Rostelecom is included in MSCI Russia Index. Current weight in MSCI Russia Blue chip is 0.93%2 § Investment rating “BBB-” from Fitch Rating (confirmed in August 2013), credit rating “BB+” from S&P rating agency (confirmed in March 2014)

1 – as of end of 1Q2014 2 – as at May 23, 2014 5 www.rostelecom.ru New Executive Management Team Members Sergey Maria Kalugin • President - CEO • Vice-President, Strategy and Investor Florentieva Relations • Joined the Company in March, 2013 • Joined the Company in May, 2013 • 12 years experience in Telecom & Media • 7 years experience in Telecom & Media • Previously CEO of National • Previously Deputy CEO of National Telecommunications Andrey • Senior Vice-President, Innovations Cheglakov • Joined the Company in April, 2013 Kai-Uwe • Vice-President - CFO Mehlhorn • Over 10 years experience in Technology • Joined the Company in May, 2013 • Previously worked as Deputy Director • Over 21 years of TMT experience, 11 years • Over 21 years of TMT experience, 11 years General at Federal Goznak at CFO position • Previously CFO of Megafon and . Dmitriy • Vice-President, IT Sadkov Larisa • Joined the Company in June, 2013 Tkachuk • Senior Vice-President - Commercial Director • Over 13 years of experience in IT • Joined the Company in April, 2013 • Previously served as Director of Management Consulting Department at IBS • Over 10 years of Telecom & Media and at McKinsey & Company experience Alexander • Previously Commercial Director at Megafon • Senior Vice-President, Network Tseitlin Maintenance Mikhail • Vice President of Legal Affairs Irzhevsky • Joined the Company in May, 2013 • Joined the Company in October, 2013 • Over 30 years of Telecom experience • Over 20 years of consulting in international • Previously CEO at Mostelecom law firms • Previously Partner at Freshfields Bruckhaus Deringer LLP 6 www.rostelecom.ru Rostelecom business mix Fixed-line business

Revenue, RUB bn Fixed-line RGUs(1), mln

291 28.2 287 26.5 Rostelecom (consolidated) 11

Revenue and OIBDA, RUB bn 280 9.7 10.6 6.9 7.5 332 326 11 2012 2013 2012 2013

One-off Revenue from project Telephony B2C+B2B “Election” 36.2% Broadband B2C+B2B 321 34.8% Pay TV 120 113 Mobile business

Revenue, RUB bn Mobile subs, mln

2012 2013 13.6 14.8 Revenue OIBDA % OIBDA margin One-off Revenue from project “Election” 41 39

2012 2013 2012 2013

Note: (1) Revenue generating units 7 www.rostelecom.ru (2) Revenue breakdown based on IFRS consolidated accounts excluding intercompanies 2. Corporate and financial highlights

8 www.rostelecom.ru Key Recent Corporate Events and Results for 1Q2014

HIGHLIGHTS

Strategic and business news Corporate news • On Feb 6, 2014 Rostelecom signed a framework agreement with • On March 31, 2014, Rostelecom’s Board of Directors approved that will lead to the integration of their mobile the long-term incentive (option) plan for its management. assets. • On April 2, 2014, the EGM approved the appointment of the new • Rostelecom successfully acted as 2014 Olympic and Board of Directors and amendments to the Company’s Charter Paralympic Games general partner. aimed at extending the authorities of Board members in managing subsidiaries and affiliates. • On March 28, 2014 Rostelecom completed the first stage of the deal to establish a JV with Tele2 Russia. • The Board of Directors set June 30, 2014 as the date for the 2013 Annual General Meeting of Shareholders (the “AGM”). • Standard & Poor’s Rating Services has confirmed Rostelecom’s ‘BB+’ Corporate Credit Rating with a Stable Outlook. • The Board of Directors has recommended that the AGM approves a 2013 dividend payment on ordinary and preferred • On April 24, 2014 Rostelecom signed a RUB 600 mln state shares of RUB 8,824 million, or 25% of RAS net profit for 2013 contract with the Federal Education and Science Supervision (or 37% of IFRS net profit). Agency for organizing video surveillance across Russia during the Unified State Exams in 2014. Product development • On May 13, 2014 Rostelecom signed a RUB 163 bln 10-year state contract with the Federal Communications Agency • IPTV: new bundles and offerings (Rossvyaz) on providing universal communications services. • OTT products: the first multiplex for OTT-customers Rostelecom will build new fibre lines of approximately 200,000 km in length and provide access for over 13,6k • New content offerings: Paramount Channel exclusively on settlements. Rostelecom networks, new TV channels added (Discovery HD/Science, TLC), unlimited content storage time opportunity, • In March 2014, Rostelecom launched a company-wide launch of BRAIN GAMES with National Geographic Programme for Operational Efficiency Improvement. • -Asia transit backbone development

9 www.rostelecom.ru Key Operational Results for 1Q2014

Fixed Broadband Pay-TV Fixed-line Voice (mln subscribers) (mln subscribers) (mln subscribers)

+8% YoY -6% YoY +8% YoY 27,8 10,8 10,6 27,4 10,3 27,0 10,1 7,5 7,6 26,5 10,0 7,1 7,2 7,3 26,0 143 140 251 251 247 249 460 459 129 131 132 245 450 448 437

1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14

Fixed Broadband Fibre Mobile Segment IPTV (mln subscribers) (mln subscribers) (mln subscribers)

400 600 +28% YoY +33% YoY 400 +9% YoY

350 Effect of 4,3 550 2,3 350 4,0 2,2 14,8 14,8 mobile 3,8 2,0 13,6 13,8 14,1 3,5 1,9 300 start-up 3,3 300 500 1,7 regions 249 249 250 243 441 234 210 250 422 418 418 450 201 217 180 182 182 402 200

400 200

150

350 150

100 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14

ARPU ! As a result of merger In accordance with the Group accounting policy all comparatives were revised for FY2011, FY2012, FY2013. Quarterly data were revised starting from 4Q2012 as the first comparative period for 4Q2013. 10 www.rostelecom.ru Key Financial Results for 1Q2014

OIBDA (RUB bln) and Revenue (RUB bln) OIBDA margin (%) OIBDA +1.1% YoY 37,0% 36,5% 36,5% margin, % +3.6% YoY 33,0% 29,5% 79,6 80,4

73,2 70,6 85,3 79,9 81,0 29,4 29,1 29,6 25,2 26,5

1Q13 2Q13 3Q13 4Q13 1Q14 Total Fixed-line 1Q13 2Q13 3Q13 4Q13 1Q14

CAPEX (RUB bln) Net Income (RUB bln)

CAPEX / 12,6% Net Income 31,6% Revenue, % margin, %

25,1% 8,6% 8,0% 8,2% 17,8%

12,4% 10,2 25,1 9,5% 21,4 6,4 6,5 6,9 14,4 1,2% 10,0 7,6 1,0 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14

! As a result of Svyazinvest merger In accordance with the Group accounting policy all comparatives were revised for FY2011, FY2012, FY2013. Quarterly data were revised starting from 4Q2012 as the first comparative period for 4Q2013. Financial Results for 1Q 2014, i.e. Revenue, OIBDA, Net Income include proceeds from mobile subsidiaries that have been transferred as a result of the deal with Tele2 in the end of 1Q 2014. 11 www.rostelecom.ru Revenue structure

FY 2013 1Q 2014

Other Other Local 19% Local 19% Telephone Telephony services 26% 27% Pay-TV Pay-TV 4% 4%

DLD / ILD, Broadband DLD / ILD, Broadband Intra-Zonal Internet Intra-Zonal Internet 10% 17% 10% 19% Interconnect Interconnect Mobile & rent of & rent of Mobile 12% 11% channels channels 11% 11%

The revenue structure changed in favour of growing segments, including broadband and pay-TV.

12 www.rostelecom.ru Cash Control in a volatile macroeconomic environment

Total Debt Net Debt Analysis FCF2 Analysis (RUB bln) (RUB bln) (RUB bln) Net Debt/ 1,9 OIBDA 1,8 1,8 1,6 1,7

17 17 14 225 228 13 228 215 215 203 207 200 181 184

-3

1 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 1H13 9M13 2013 1Q14

CAPEX Trends (RUB bln) KEY DATA

CAPEX / Revenue • In 1Q 2014, despite the need to finance the mandatory buyback as a result of 32% mobile assets demerger, total debt decreased by RUB 13.4 bln to RUB 214.7 bln. The main factors that helped to achieve debt reduction were: 25% ü Deconsolidation of mobile subsidiaries’ obligations as a result of the first stage of JV transaction 18% ü Positive cash-flow generation used for loans repayments 12% • In 1Q 2014, CAPEX decreased by 60% y-o-y to RUB 10 bln. The decrease in 25 9% 21 investment in the reporting quarter resulted predominantly due to more effective 14 10 procurement activity and uneven distribution of investing cash-flows within the 8 year. 1Q13 2Q13 3Q13 4Q13 1Q14 • In 1Q 2014, the CAPEX to Revenue ratio amounted to 12% compared to 32% in 1Q 2013. • In 1Q 2014, the Company reported FCF of RUB 12.7 bln.

1 - Excluding 3rd parties’ loans of mobile subsidiaries 13 www.rostelecom.ru 2 - Free Cash Flow = net cash provided by operating activities less CAPEX 3. Rostelecom strategy update

14 www.rostelecom.ru Rostelecom strategic priorities Fixed-line business Mobile services business

ü Accelerated expansion of fiber last ü Joint venture with Tele2 Russia - creation mile to unlock value of the largest fixed- of a national mobile operator line network in Russia − Sufficient scale to compete with MTS, MegaFon, VimpelCom

ü Strengthening competitive advantage in − Effective utilization of / bandwidth to household and «heavy» licenses coupled with substantial content delivery capex savings and B/S deleveraging

ü Accelerate roll-out of 3G/4G networks nationwide ü Bundling of services to reduce churn rates – Triple play and other ü Capitalise on the mobile broadband opportunity

ü Maintain high level of operational ü Leadership in Pay-TV market and efficiency investing into content ü Convergent offerings: mobile as part of 4- Play bundles

ü Focus on digital platforms and services ü Continue to use Rostelecom backbone and – OTT, SaaS and other backhaul

15 www.rostelecom.ru Russian TMT market forecasts: key segments

Fixed and Pay TV Digital media and advertising IT and ICT services

RUB bn RUB bn RUB bn 568 +1% 489 +13% 507 +15% 528 88 +29% 109 +3% 78 +22% 93 49 +13% 56 99 +12% +23% 87 +12% 267 195 108 78 –6% 250 29 25 26 70 25 +11% 50 182 195 +1% 15 282 +14% 191 +5% 153 149 81 77 –1%

2013 2018 2013 2018 2013 2018 Data center and cloud-based solutions Broadband B2C B2B Digital content Mobile advertising Communication services Pay TV B2O Online advertising TV advertising Information security Telephony B2C Other services Integration and IT outsourcing

§ Stagnation as a result of decline in fixed § Transition from analog to digital content § Rising demand from government and voice and slowdown in broadband distribution business for outsourcing of data storage segment growth § Significant growth in online advertising and processing § Pay TV market will continue to grow as market, primarily, in search advertising. In § Corporate clients’ cost optimization for consumers are willing to pay for diverse addition, rapid growth is observed in mobile communication and IT services and high-quality content and online video advertising § Transition to IT-outsourcing model § The fastest growing segments are OTT¹ and IPTV

+xx% Revenue CAGR in 2013-2018 ¹OTT (Over the Top) - delivery of video signal to user’s device (computer, handset) over 16 www.rostelecom.ru the Internet bypassing service operator Source: iKS-Consulting, J’son&Partners, Direct Info, IDC, OVUM, PwC, Rostelecom Rostelecom current position in B2C segment Pay TV • Rostelecom is the leader in Pay TV subscribers¹, mln Market share by revenues, %, 1Q2014 Pay TV market. Company’s Rostelecom revenue market share in 5% IPTV reached 62% in 10% MTS 10.110.2 ER-Telecom 1q2014 8.8 23%22% 7.5 7.6 Akado • IPTV is the key growth driver 6.9 2012 Tricolor in this segment. Rostelecom 31% 12% 2.9 2.5 2013 Orion-Express subscriber base increased 2.6 2.5 2.3 2.5 1.0 1.0 1.0 5% VimpelCom by 33% y-o-y and reached 1Q14 5% 9% Others 2.3m subscribers in 1q2014 Rostelecom Tricolor VimpelCom MTS ER-Telecom

Broadband B2C • Rostelecom is the largest Fixed broadband subscribers, mln Market share by subs, %, 1Q2014 provider of fixed broadband services in Russia 10% 10% Rostelecom • As of 1Q2014 the number of 9.8 10.0 29% 9.0 MTS fiber optic subscribers 2012 39%36%41% increased by 28% y-o-y to 39%41% ER-Telecom 2013 4.3m subscribers, while the 2.1 2.3 2.3 2.1 2.3 2.3 1.9 2.7 2.8 10% VimpelCom total subscribers base 1Q14 11% Others increased by 8% y-o-y and 9% 11% Rostelecom MTS VimpelCom ER-Telecom 11% Source: ACM Consulting amounted to 10.8m

Fixed-line telephony • Rostelecom market share Fixed-line subscribers, mln Market share by subs, %, 1Q2014 was stable in 1Q 2014 • As of 1Q 2014 the company 28.2 26.5 26.0 18% served 26.0m subscribers Rostelecom (6% decrease versus 1Q MTS (MGTS) 2013) 2012 13%13% 69% 68% 2013 13% Others 7.2 6.9 6.9 68% 5.0 5.0 4.9 1Q14

Rostelecom MTS Others

Source: iKS-Consulting, ACM Consulting, operators data Note: All data shown includes Russia only. 17 www.rostelecom.ru ¹ For Tricolor TV only paying subscribers are taken into account Key strategic pillars of Rostelecom fixed-line business

1 Technological leadership in IP networks § Fibre network rollout § Increase capacity of backbone and regional networks

5 2 Differentiated Efficiency increase offerings

§ Capex optimisation § Focus on development of with strong focus on unique content offering return on investment § Triple play & other § Productivity increase bundling § Acceleration of development of new products 4 3 Organisational Best-in-class transformation customer service

§ Transformation of § Modernisation of customer corporate and service platform organisational structure § Upgrade to unified OSS/BSS¹ systems 18 www.rostelecom.ru ¹OSS/BSS - Operation Support System/Business Support System 1 High speed access

From single-point roll-out today… …to systematic approach to network development

xDSL PON

§ New strategy for household coverage – “Broadband conveyor”, which involves cluster-based roll-out, covering all households in city regions. Single-point roll-out is only allowed in up to 20% of households § Ensure continuity of the priority access technology for the existing network. All new backbone segments are PON-ready § Decommission telephony lines and exchanges in regions where supported by the business case § Use CPEs with multiple interfaces (Ethernet, RJ, RF, WiFi 2.4 / 5GHz) § Use access as replacement for last mile in regions with low population density § Target households covered by the end of 2016 – 33m – all households in high and medium rise buildings § Sign framework agreements and decrease procurement costs by switching to standardised network architecture and equipment

19 www.rostelecom.ru Development of differentiated offerings for B2C 2a subscribers

Effect of bundled services on the level of churn § Differentiated tariffs for Inter-regional and

international calls Telephony 1.00 p.p.

Telephony § Bundling with Broadband and Pay TV services Telephony + BB 0.65 p.p. to reduce churn and maintain subscriber levels Telephony + Pay TV 0.62 p.p.

Telephony + BB + Pay TV 0.44 p.p.

Rostelecom B2C Broadband subscribers § Speeds 10% higher versus competitors, for the same monthly tariffs CAGR +10% Broadband § Exclusive speed of 1Gbit/s for top-end tariff

2013 2018

TV subscribers as % of Broadband subscribers1, % 100% § Interactive TV with unique content proposition PT 85% (HD, exclusive channels, VoD²) Belgacom Pay TV 51% FT 38% § ОТТ platform (TV Everywhere)³ KPN

2006 2008 2010 2012

§ § Financial services Payment for goods and services, cash services, credits, overdrafts and deposits, money transfers § Smart house / Safe house § Home monitoring, control on water and electricity costs with smart meters, New services remote control of electrical appliances, remote monitoring of health § Online and mobile commerce § Mobile and online payments, use of personal mobile and fixed line telephony accounts as electronic wallet

Source: McKinsey, Сompany data, Morgan Stanley research ¹PT - Portugal Telecom, Belgacom – Belgian operator, FT – Telecom, KPN – Dutch operator 20 www.rostelecom.ru ²VoD – Video on Demand ³ТV Everywhere – Allows consumers to watch TV on any connected device (e.g. mobiles, tablets, etc) 2b Pay TV segment strategy

1 § Increase speed and network capacity in order to switch subscribers to bundled Network improvement in services with higher ARPU Content providers Broadcasters Distributors order to increase ARPU § Examples: roll out FTTH VDSL networks in Europe, upgrade of cable networks 2 § State of the art technology, high speed Provide best-in-class network as an instrument for cross selling Distributors services to enhance and client retention Content providers Broadcasters customer loyalty § Examples: LGI Set-Top-Boxes (stickiness) and Free TV offerings (cross-selling)

3 § Acquisition or merger with content Vertical integration with providers to prevent emergence of content providers to intermediaries Content providers Broadcasters Distributors avoid intermediaries § Examples: / NBC Universal

4 Providing fixed and § Acquire expertise in fixed line business to mobile services in provide attractive bundled offerings Content providers Broadcasters Distributors bundled offerings § Examples: acquisition of CWW

5 Expand digital coverage, § Expand digital coverage to allow allowing monetisation monetisation of content on all platforms content independent of § Examples: digital and related business of Content providers Broadcasters Distributors the platform P7S1, increase in VoD for RTL

21 www.rostelecom.ru 2c B2B and B2Gs products development

Large corporate clients SME

§ Package solutions for companies with § Full Package Products for sub- requirements of large, high capacity, segments reliable and secure networks § Package: Broadband + fixed voice, § Core services: VPN, WAN, option – VPN + hosting Broadband, data centers hosting, fixed voice § Cloud computing services О7: Hosted PBX, virtual office, web- § Cloud computing services О7: call video- conference communications center, unified communications, web- video- conference communications, § M2M services: transport and telepresence and broadcast, logistics, CCTV monitoring information security, managed services, content filtering

§ Integrated solutions

22 www.rostelecom.ru 3 Implementing client service best practices

Key initiatives Targets

§ Unified call-center on the base of common IT infrastructure § 90% calls processed at first attempt Call center § Unified call number for client services and client call rebalancing system § 95% client satisfaction § Unified SLA rate

Online client § Multiplatform web-interface: rt.ru portal and ‘my account’ service § > 50% share of services § Focus on customer self-service through web-channels remote channels

§ Restructuring of retail distribution network: carve-out of retail chain operations into § 20% share of channel in revenues Retail separate entity, retail chain optimisation, franchising opportunities distribution § Rebranding of the distribution network to increase sales and improve brand awareness § 2x decrease of distribution network § Focus on efficiency of distribution network (margins) OPEX

§ Less than 2% share § Standardisation of maintenance process of repetitive requests 2nd and 3rd § Centralisation of network monitoring and management support lines § Less than 24h § Upgrade incentive system for maintenance staff with key focus on quality of service request processing time

Client-centric approach for large corporate clients: § Personal account manager to provide assistance on key customer support and services § 90% calls processed questions at first attempt Corporate and § Dedicated technical support line, quality of service (QoS) management § 3% lost calls rate SME accounts (LCR) Differentiated approach for SME clients: § 80% service level § Standartised SLA depending on service package commitment § Dedicated sales and support channels with unified business processes

23 www.rostelecom.ru 4 Organizational transformation

Organizational § Centralisation of support functions: IT, backoffice, etc. transformation § Creation of competence centers at macro branches level initiatives § Outsourcing of certain business functions and related optimisation of organizational structure

§ Development of ‘ideal’ operational model with solid scalability potential on the base of some pre- selected local branch ‘Ideal branch’ – Pilot project in Voronezh branch model § Replication of developed operational model at regional branches level § ‘Ideal branch’ project is expected to be instrumental for the whole organizational process and should also set the ground for CRM and other IT systems

Corporate § Management efficiency: lead by example, mentorship, commitment, encouragement and staff culture training transformation § Customer-oriented approach, continuous improvement and sustainability § Motivate to action and evaluate on real achievements improvement § Simplicity and delegation: facilitate accomplishment of the objectives and empowerment

24 www.rostelecom.ru 5a Focus on improvement of operational and investment efficiency Launch of Operational Efficiency Improvement Programme in March 2014 Potential for improvements Yearly savings breakdown Personnel productivity of cost base (preliminary estimates) Revenue per employee, RUB mln/person RUB 5 bln RUB 10 26% bln RUB 15 CAGR bln 34% 4.6 4.2 40% +10% >2.52.9 2.9 1.8

Technical Commercial Administrative

FY 2014 FY 2015 FY 2016 RTK RTK AT&T DT/T- Orange 2013 2018 Mobile

According to the results of GCB, prepared by AT Kearney, deviation of Rostelecom’s costs from best Data for foreign operators include mobile business data practices of comparable companies is 36% (on average). (Source: companies’ data, World Bank)

Systematic approach to cost transformation

Potential Potential Potential Technical Unit savings Commercial Unit savings Administrative Unit savings per year per year per year

Personnel efficiency improvement Medium Contact-centres Medium Optimization of real estate in use High

Modernization of rural networks High Users’ equipment Medium Reduction of electricity costs TBD

Modernization of urban networks TBD Points of sale TBD Reduction in transportation costs Medium

Consolidation of control centers Medium Channel rent Low Logistics optimization TBD

Other TBD Bills printing and delivery Low Other Low

Income guarantees High 25 www.rostelecom.ru Other Medium 5b Focus on improvement of operational and investment efficiency Management Approach to Operational Efficiency Improvement Programme

Organizational Structure Schedule

March - Sergey Kalugin Stage 1 April Targets determination Project Sponsor President 2014

ü Top-down analysis of benchmarking results using GCB methodology Kai–Uwe Mehlhorn ü Detection and consolidation of Project Owner Senior Vice President and existing initiatives CFO ü Evaluation of potential optimization activities regarding new and existing projects

Larisa Tkachuk Senior Vice President, Commercial May - Detailed plans and initiatives Mid June Steering Director Stage 2 preparation Galina Rysakova 2014 Committee Senior Vice President of Organizational Development and ü Coordination of optimization activities Human Resources with pilot MRFs and the Steering Alexander Tseitlin Committee Senior Vice President, Network ü Coordination of optimization activities Maintenance with the currently active projects Maria Florentieva ü Balancing cost transformation Vice President, Strategy decisions with the main KPIs (quality Alexander Abramkov control, revenue growth, lower Vice President of Administration subscribers outflow, etc.)

June Stage 3 2014 - Implementation Project Office: 2017 Rostelecom & ATKearney ü Include the initiatives in the budget for 2015 ü Implementation of the initiatives in pilot MRFs ü Extension of the initiatives to other MRFs 26 www.rostelecom.ru ü Monitoring the results Focus on shareholder value

Revenue OIBDA margin

Target: 3-4% CAGR over next 5 Target: 100-200 bps improvement years over next 5 years ü Focus on Broadband and IPTV ü Focus on centralization of support offering (fibre + unique content functions + operational efficiency offering) improvement ü Achieve coverage of 33 mln households (1Gb/s) in 2 years Significant FCF and ROIC improvement

CAPEX / Revenue

Target: 200-300bps improvement over next 3 years ü Focus on per unit cost (2H’13 purchases c. 50% cheaper than in 2012)

27 www.rostelecom.ru 4. Creating T2-RTK Holding - national mobile player

28 www.rostelecom.ru Joint venture with Tele2 Russia: transaction highlights

§ Rostelecom and Tele2 Russia to merge their mobile assets to form a new national mobile operator T2 RTK Holding (or “JV”) in the largest in-market consolidation in Russian telecom space § Subject to receipt of necessary regulatory and corporate approvals and successful completion of all transaction stages, Rostelecom will get 45% ownership in JV and is expected to become the largest single beneficial shareholder § Transaction is effected in two stages Stage 1 (completed): – Rostelecom contributes its standalone mobile subsidiaries and certain mobile assets (except for its spectrum in the 450MHz band), including SkyLink, along with associated net debt of approximately RUB 37bn – Tele2 Russia contributes all its mobile assets, along with associated net debt of approximately RUB 30bn Stage 2: – Rostelecom will transfer its integrated mobile businesses and integrated licenses (including LTE), subject to an internal reorganisation required to effect the transfer § Before completion of Stage 2, JV will get access to Rostelecom spectrum assets through MVNO arrangements § Transaction was approved by Rostelecom Board of Directors on December 12, 2013

29 www.rostelecom.ru Transaction structure

1 Stage 1 – transfer of mobile subsidiaries 2 Stage 2 – transfer of integrated mobile assets

Other Other VTBC VTBC investors investors 50% 50% 50% 50%

Tele2 Russia Holding AB Rostelecom Tele2 Russia Holding AB Rostelecom

74% / 55% 26% / 45% 55% / 55% 45% / 45% 100% Integrated mobile assets of MVNO T2-RTK Holding Rostelecom + licenses (including T2-RTK Holding MVNO LTE)

100% 100%1 100%1 100%2 100% Standalone Standalone mobile Mobile Integrated mobile assets of Mobile subsidiaries of Tele2 mobile subsidiaries and selected subsidiaries of Rostelecom + licenses (including Russia subsidiaries of assets of Rostelecom Tele2 Russia LTE) + assets transferred earlier Rostelecom

Economic rights / Voting rights

§ Rostelecom contributed its standalone mobile § Rostelecom transfers its integrated mobile businesses subsidiaries (including SkyLink), selected assets, along and licenses (including LTE), subject to an internal with associated net debt of c. RUB 37bn, and received reorganisation required to effect the transfer 26% economic stake in JV (45% voting rights) § Upon successful completion of Stage 2, Rostelecom’s § Tele2 Russia contributed all of its mobile assets, along economic stake will increase from 26% to 45% with associated net debt of c. RUB 30bn, and received § Rostelecom will enter into MVNO agreement with JV for 74% economic stake in JV (55% voting rights) LTE to provide 4-play services § JV got access to Rostelecom integrated spectrum assets through MVNO arrangements

1 In CJSC Acos: 94,4456%; in CJSC SkyLink: 50% (effectively 100% of the charter equity); in OJSC Apex: 93.49%; in CJSC TSRS: 40%

30 www.rostelecom.ru Transaction rationale (1/4) Key considerations

Strategically important transaction for Rostelecom

§ Reinforce Rostelecom’s mobile strategy by creating mobile operator with sufficient scale to compete nationwide § Rostelecom is expected to be the largest single beneficial owner in the JV – Pre-emptive rights in the event of a strategic sale by Tele2 Russia and right to acquire additional equity interests (up to the controlling stake) in the event of an IPO § Retention of upside from mobile-fixed synergies and future convergence

Builds long-term shareholder value

§ Substantial operational and financial upside from strengthened competitive position § Significant synergy potential on capex and opex § Release of cash flows at Rostelecom level

31 www.rostelecom.ru Transaction rationale (2/4) Re-positioning Rostelecom’s mobile assets through JV with Tele2 Russia

Benefits for Rostelecom Key combination parameters

ü Increased scale Rostelecom Tele2 Russia – Over 38m subscribers mobile – Over 16% market share (by subscribers) Regions 35 41 ü Full national license coverage covered3 ü Increased footprint Subscribers 14.8 23.7 – From 35 to 641 operational regions (mm)4 ü Capture mobile data growth opportunity ü Provide convergent services Revenue 39 65 (RUB bn)4 ü Ability to accelerate 3G/4G networks roll-out ü Accelerate monetization of licence portfolio Market 6% 10% 6 ü Capitalize on Tele2 Russia’s know-how and impressive share track record: from a newcomer to niche player successfully competing with BIG-3

Mobile revenues 2013 (RUB bn)2 Nationwide license coverage Mobile assets Russia Population coverage5 100% Other players Tele2 Russia Rostelecom Licenses held (by region of RF): 700 MHz (LTE) 83 regions 800 MHz (LTE) 83 regions 900 MHz () 26 regions 272 104 257 229 5 39 1800 MHz (2G / LTE ) 78 regions 65 2100 MHz (3G / UMTS) 71 regions 2300 MHz (LTE) 39 regions MTS MegaFon VimpelCom JV 2600 MHz (LTE) 83 regions

Source: Companies data 1 Including 12 regions where Tele2 operations overlaps with Rostelecom. Excluding CDMA only regions. 2 Rostelecom revenue including CDMA subscribers. Only Russian business is taken into account 3 Number of regions with commercial 2G, 3G mobile operations as of Q3 2013 32 www.rostelecom.ru 4 Based on 2013 full year 5 License coverage, including technology neutrality 6 Based on number of subscribers Transaction rationale (3/4) Substantial synergy potential

Area Synergies

ü Upsell existing Tele2 Russia subscribers high speed mobile data packages ü Cross-selling fixed line services to mobile subscribers Revenue ü Converged proposition for Rostelecom subscribers: offer mobile services bundled with Rostelecom fixed line services ü Increased revenues from international roaming due to renegotiated tariffs for Tele2 Russia

ü Site rationalisation in Rostelecom and Tele2 Russia overlapping regions ü Efficient 3G and 4G roll-out through colocation on existing Tele2 Russia sites ü Efficient 4G network roll-out in Tele2 Russia regions due to wide spectrum bandwidth Network & IT ü Backhaul, backbone and core network consolidation ü Optimisation of roaming costs ü Consolidate and simplify IT and billing

ü Increased bargaining power with federal distributors Distribution & ü Rationalisation of retail network by leveraging Rostelecom retail locations and Tele2 Russia’s marketing monobrand stores ü Reduction in marketing costs

ü Leveraging Tele2 Russia know-how and business development track record to launch a national operator with uniform high standard of operation across the country and efficient Other synergies central management function ü Elimination of overlapping functions ü Efficiencies in property management and procurement

33 www.rostelecom.ru Transaction rationale (4/4) Release of cash flows at Rostelecom level

Revenue 2013 (RUB bn) Net debt as of 4Q’13 (RUB bn)

100% 112%3% 100% 88% 17% (39) 83% (37)

326 217 287 180

Rostelecom as is Rostelecom mobile Rostelecom less mobile Rostelecom as is Rostelecom mobile Rostelecom less mobile assets assets assets assets¹ x% Share in Rostelecom total revenues x% Share in Rostelecom total net debt

CAPEX 2013 (RUB bn) Carve-out impact

100% 37% § Additional cash flow released

(25) 63% § Substantial savings of mobile CAPEX, particularly from capital intensive roll-out of 3G/4G networks 68 43 § Balance sheet is strengthened § Elimination of debt related to mobile operations

Rostelecom as is Rostelecom mobile Rostelecom less mobile § Minor impact on top line assets assets § Large scale of fixed line business compared to mobile x% Share in Rostelecom total CAPEX

Source: Company data including CDMA subscribers 1 Rostelecom’s net debt less net debt transferred to JV

34 www.rostelecom.ru Indicative transaction timetable

Key transaction docs Transfer of standalone Transfer of Integrated Fully Completion of signed and transaction assets by Rostelecom assets and licenses by integrated transition period announced and Tele2 Russia Rostelecom operations

STAGE 1 STAGE 2 INTEGRATIONAL PHASE FULL INTEGRATION

1Q’14 4 – 10 months 2014 – beginning of 2015 2015 and thereafter

NOV 1Q’2014

Integration Stage One Stage Two largely closed closed completed

Reorganization through transfer of integrated mobile assets to the Implementation of integration plan subsidiary Regulatory and corporate approvals obtained JV gets access to Rostelecom Active network rollout spectrum assets through MVNO

35 www.rostelecom.ru Appendix

36 www.rostelecom.ru Svyazinvest Merger – Key Results

Structure as of November 20th, 2013 Key results

• Simplification of shareholders structure, State Property elimination of cross-ownership. Agency • Assets consolidated: State stake • 20 daughter companies merged with 51,13%1 Rostelecom (influence on RAS accounting); • 2 major Svyazinvest assets merged –

9,38%1 28,2% stake in Bashinformsvyaz and Mobitel 80% stake in Central Telegraph (total expected revenues in 2013 – over RUB 7,21%1 Treasury 10 bln) (influence on both RAS and shares 32,28%1 IRFS accounting) Other • Number of shares decreased by c9,3%. Shareholders

Total number of shares: Ordinary shares 2 669 204 301 Preferred shares: 242 831 469

1- voting stake

37 www.rostelecom.ru Group’s dividends

Dividends (RUB bln) KEY DATA

% of net income RAS / IRFS • In May 2014 the Board of Directors recommended to approve 2013 46%/ 34% dividend payment in the total amount of RUB 8,824 bln or 25% of RAS net income (37% of IFRS net income) for 2013 or:

25%/ 25%/ • RUB 4.848555414552 for 1 preferred share of class A 24% 37% 15,0 • The dividend per ordinary share is calculated as follows: the total 8,8 * sum of RUB 8,824 mln, excluding the accrued dividends on the 7,3 7,8 8,2 6,2 Class A preferred shares, divided by the amount of Rostelecom ordinary shares outstanding as at July 14, 2014 (excluding the 2008 2009 2010 2011 2012 2013 treasury shares on Rostelecom’s balance sheet).

• Dividends are to be approved during shareholders’ meeting in June 2014. Dividend for 2012 • Dividends are calculated as: • RUB 4.1022 for 1 preferred share • at least 20% of IRFS net income / by number of ordinary shares for of class A 1 ordinary share; • RUB 2.4369 for 1 ordinary share • 10% of RAS Net income / 25% of total number of shares for 1 preferred share.

* Subject to AGM approval on June 30, 2014

38 www.rostelecom.ru Rostelecom in B2B and B2G, B2O Segments

1 2 B2B and B2G market in Revenues, % B2O market in Revenues, % 1 Rostelecom is the absolute market leader in B2B and 19% 54% Rostelecom Rostelecom B2G, with 54% market share 46% other operators other operators 81% 2 Leader in B2O segment with 19% market share

3 4 3 5% annual revenue growth in Rostelecom revenues in B2B and Rostelecom revenues in B2O, B2B and B2G (excl. one-offs) B2G, RUB bln RUB bln 125 +5% growth** without +1% growth 11 one-off in 1Q12 4 40.4 1% annual growth in B2O 114 119 40.2

2012 2013 2012 2013 One-off revenue from project “Election”

** - growth rate without video surveillance revenue in 1Q 2012

39 www.rostelecom.ru Source: Rostelecom, IKS-Consulting, AC&M Cloud & IT Services: Competitive Advantage to Become the Unchallenged Leader

E-government O7. City ü United portal for public services ü City infrastructure monitoring ü Public services in e-format ü Predicting and prevention of ü 70 out of 83 regions already emergency situations subscribed (200K total in all levels)

O7. Medicine O7. 112 ü United electronic medical card ü United contact number for ü E-front desk admission and processing of messages ü Medicine info systems ü Special services coordination

O7. Education O7. DOC ü E-School and E-Nursery ü Office administration ü Social network for school students ü Document exchange ü Educational TV channel

O7. Housing O7. Business ü Tariff and budget control ü Automation of key business ü Payments and financial assets processes ü ü Market potential - over 100K Virtual office service companies 40 www.rostelecom.ru P&L Statement

Bln RUR FINANCIALS GROWTH rates Growth P&L 1Q 2014 1Q 2013 2Q 2013 3Q 2013 4Q 2013 2013 2012 2011 1Q 14/13 13/12 12/11 YoY

Revenue (see breakdown below) 80.406 1.1% 79.559 79.858 80.959 85.328 325.704 332.435 312.330 1.1% -2.0% 6.4%

Operating Expenses (68.423) 0.6% (67.994) (67.000) (68.213) (77.629) (280.836) (278.604) (252.294) 0.6% 0.8% 10.4% Wages, salaries, other benefits and payroll(23.989) taxes (see breakdown4.2% below)(23.021) (21.937) (21.760) (24.284) (91.002) (88.815) (80.801) 4.2% 2.5% 9.9% including stock option program 0.000 0.000 0.000 1.101 Depreciation and Amortization (14.514) -18.8% (17.865) (16.270) (16.816) (17.463) (68.414) (66.511) (59.322) -18.8% 2.9% 12.1% Interconnect Charges (12.691) 22.6% (10.355) (12.555) (12.720) (14.116) (49.746) (48.858) (42.123) 22.6% 1.8% 16.0% Materials, utilities, repair and maintenance(6.922) 11.1% (6.228) (6.166) (7.994) (8.107) (28.495) (28.483) (29.004) 11.1% 0.0% -1.8% Other operating income 2.569 -6.2% 2.739 2.934 5.766 4.490 15.929 14.749 15.703 -6.2% 8.0% -6.1% Other operating expense, including: (12.876) -2.9% (13.264) (13.006) (14.689) (18.149) (59.108) (60.686) (56.747) -2.9% -2.6% 6.9% Impairment of property, plant & equipment (PPE)0.000 0.000 0.000 0.000 Loss on sale and disposal of PPE (0.092) 42.3% (0.065) 0.034 (0.117) (0.196) (0.344) (0.752) (0.829) 42.3% -54.3% -9.3% Bad debt reserve (1.011) 111.5% (0.478) (0.296) (0.953) (0.413) (2.140) (1.389) (0.632) 111.5% Operating Profit 11.983 3.6% 11.565 12.858 12.746 7.699 44.868 53.831 60.036 3.6% -16.7% -10.3% Operating Profit margin 14.9% 2.5% 14.5% 16.1% 15.7% 9.0% 13.8% 16.2% 19.2% 2.5% -14.9% -15.8%

OIBDA 26.497 -10.0% 29.430 29.128 29.562 25.162 113.282 120.342 119.358 -10.0% -5.9% 0.8% OIBDA Margin 33.0% -10.9% 37.0% 36.5% 36.5% 29.5% 34.8% 36.2% 38.2% -10.9% -3.9% -5.3%

Income from equity accounted investees 0.011 21.9% 0.009 0.027 0.025 0.116 0.177 0.053 0.198 21.9% 234.0% -73.2% Finance costs (4.184) 5.3% (3.973) (3.795) (3.887) (4.145) (15.800) (16.278) (14.572) 5.3% -2.9% 11.7% Other Investing and financial gains 1.685 103.5% 0.828 (0.270) 3.588 (0.698) 3.448 4.408 2.194 103.5% -21.8% 100.9% Foreign exchange loss, net (0.258) 84.4% (0.140) (0.396) 0.016 (0.054) (0.574) 0.489 (0.378) 84.4% -217.4% -229.4%

Profit before income tax 9.237 11.4% 8.289 8.424 12.488 2.918 32.119 42.503 47.478 11.4% -24.4% -10.5%

Income tax expense (2.345) 23.6% (1.897) (1.878) (2.326) (1.887) (7.988) (9.301) (10.659) 23.6% -14.1% -12.7%

Net Profit 6.892 7.8% 6.392 6.546 10.162 1.031 24.131 33.202 36.819 7.8% -27.3% -9.8% Net Profit margin 8.6% 8.0% 8.2% 12.6% 1.2% 7.4% 10.0% 11.8% 6.7% -25.8% -15.3%

! As a result of Svyazinvest merger in accordance with the Group accounting policy all comparatives were revised for FY2011, FY2012, 41 www.rostelecom.ru FY2013. Quarterly data were revised starting from 4Q2012 as the first comparative period for 4Q2013 Revenue Structure

Bln RUR FINANCIALS GROWTH rates Growth Revenue / Breakdown 1Q 2014 1Q 2013 2Q 2013 3Q 2013 4Q 2013 2013 2012 2011 1Q 14/13 13/12 12/11 YoY By services: Local Telephone services 20.992 -3.4% 21.730 22.403 21.734 21.568 87.436 89.504 91.526 -3.4% -2.3% -2.2% Intra-Zonal 3.762 -11.1% 4.231 4.185 4.525 4.230 17.171 19.634 22.439 -11.1% -12.5% -12.5% DLD / ILD 3.969 -15.5% 4.695 4.248 4.147 4.011 17.101 20.562 24.236 -15.5% -16.8% -15.2% Interconnect and traffic transit 6.325 13.9% 5.554 5.754 7.010 6.546 24.864 21.991 20.444 13.9% 13.1% 7.6% Mobile communication services 9.239 -2.8% 9.503 9.939 9.576 9.884 38.902 41.161 40.660 -2.8% -5.5% 1.2% Rent of channels 2.527 -24.2% 3.335 3.290 1.119 1.742 9.486 11.433 10.782 -24.2% -17.0% 6.0% Broadband Internet 14.991 10.9% 13.520 13.487 14.402 14.529 55.938 51.619 47.984 10.9% 8.4% 7.6% Pay-TV 3.425 22.9% 2.787 2.700 3.145 3.274 11.906 9.208 6.748 22.9% 29.3% 36.4% Data services 5.853 9.4% 5.349 5.617 5.575 6.485 23.025 20.872 19.227 9.4% 10.3% 8.6% Other 9.324 5.3% 8.855 8.236 9.726 13.059 39.876 46.451 28.284 5.3% -14.2% 64.2%

% of total Revenues Local Telephone services 26.1% 27.3% 28.1% 26.8% 25.3% 26.8% 26.9% 29.3% Intra-Zonal 4.7% 5.3% 5.2% 5.6% 5.0% 5.3% 5.9% 7.2% DLD / ILD 4.9% 5.9% 5.3% 5.1% 4.7% 5.3% 6.2% 7.8% Interconnect and traffic transit 7.9% 7.0% 7.2% 8.7% 7.7% 7.6% 6.6% 6.5% Mobile communication services 11.5% 11.9% 12.4% 11.8% 11.6% 11.9% 12.4% 13.0% Rent of channels 3.1% 4.2% 4.1% 1.4% 2.0% 2.9% 3.4% 3.5% Broadband Internet 18.6% 17.0% 16.9% 17.8% 17.0% 17.2% 15.5% 15.4% Pay-TV 4.3% 3.5% 3.4% 3.9% 3.8% 3.7% 2.8% 2.2% Data services 7.3% 6.7% 7.0% 6.9% 7.6% 7.1% 6.3% 6.2% Other 11.6% 11.1% 10.3% 12.0% 15.3% 12.2% 14.0% 9.1%

By customers: B2C 41.570 -0.9% 41.958 41.434 40.955 41.537 165.884 167.330 170.373 -0.9% -0.9% -1.8% B2B 18.235 1.6% 17.949 18.147 19.477 18.253 73.827 70.794 72.437 1.6% 4.3% -2.3% B2G 10.408 -1.9% 10.607 10.061 10.881 14.055 45.604 54.159 35.212 -1.9% -15.8% 53.8% B2O 10.193 12.7% 9.045 10.216 9.645 11.483 40.389 40.152 34.308 12.7% 0.6% 17.0%

B2C 51.7% 52.7% 51.9% 50.6% 48.7% 50.9% 50.3% 54.5% B2B 22.7% 22.6% 22.7% 24.1% 21.4% 22.7% 21.3% 23.2% B2G 12.9% 13.3% 12.6% 13.4% 16.5% 14.0% 16.3% 11.3% B2O 12.7% 11.4% 12.8% 11.9% 13.5% 12.4% 12.1% 11.0%

! As a result of Svyazinvest merger in accordance with the Group accounting policy all comparatives were revised for FY2011, FY2012, 42 www.rostelecom.ru FY2013. Quarterly data were revised starting from 4Q2012 as the first comparative period for 4Q2013 Balance Sheet

Bln RUR BALANCE SHEET 3/31/2014 3/31/2013 6/30/2013 9/30/2013 12/31/2013 12/31/2012 12/31/2011 Assets Current assets Cash & cash equivalents 6.250 7.287 14.891 7.416 7.960 13.629 9.634 Other investments 24.387 4.137 4.547 10.862 1.966 3.492 4.609 Prepayments 3.818 3.661 3.708 3.917 3.508 4.416 2.945 Prepaid income tax 4.802 3.635 3.381 2.701 4.894 2.951 3.384 Inventories 4.511 4.692 4.561 4.233 3.941 4.990 5.172 Trade and other accounts receivable 46.383 40.513 42.217 43.594 39.824 35.882 30.512 Other current assets 0.720 1.537 1.528 1.704 0.609 0.908 1.109 Total current assets 90.871 65.462 74.833 74.427 62.702 66.268 57.365 Assets held for sale 31.365 93.048 0.401 0.261 Non-current assets PPE & Intangible assets 327.111 396.995 393.840 389.140 335.059 399.917 348.493 Investment property 0.114 0.254 0.216 0.229 0.113 0.274 0.259 Goodwill and other intangible assets 59.278 85.724 84.672 83.196 64.346 88.329 89.340 Investment in associates 27.802 0.785 0.807 0.830 0.918 0.775 0.773 Other investments 0.700 0.112 0.147 0.138 0.520 3.035 1.829 Other non-current assets 4.024 8.325 7.752 9.430 4.266 8.191 15.061 Total non-current assets 419.029 492.195 487.434 482.963 405.222 500.521 455.755 Total assets 541.265 557.657 562.267 557.390 560.972 567.190 513.381

Liabilities Current liabilities Accounts payable 51.150 51.222 95.857 49.838 73.635 61.839 41.279 Short-term loans and borrowings 37.123 56.698 47.639 59.432 33.209 65.016 82.453 Other current liabilities 6.803 9.001 8.987 8.843 9.419 10.287 8.863 Total current liabilities 95.076 116.921 152.483 118.114 116.263 137.142 132.595 Liabilities held for sale 6.399 17.647 Equity Shareholders equity 0.097 0.097 0.097 0.097 0.097 0.097 0.097 Treasury shares (81.311) (36.472) (31.194) (58.898) (68.325) (34.822) (18.388) Additional paid in capital 1.624 4.322 4.320 4.579 1.658 4.344 4.743 Retained earnings and other reserves 293.156 272.927 242.697 283.788 262.967 266.607 235.158 Non-controlling interest 3.350 2.664 2.429 3.201 3.359 2.606 9.588 Total equity 216.916 243.538 218.349 232.767 199.756 238.832 231.198 Non-current liabilities Long-term loans 177.528 157.941 152.454 166.017 184.600 152.874 94.640 Employee benefits 9.855 10.909 10.946 10.919 9.774 10.861 11.046 Deferred tax liabilities 27.802 23.322 22.927 24.626 26.728 23.107 20.518 Other non-current liabilities 7.689 5.026 5.108 4.949 6.204 4.374 23.384 Total non-current liabilities 222.874 197.198 191.435 206.511 227.306 191.216 149.588 Total equity & liabilities 541.265 557.657 562.267 557.392 560.972 567.190 513.381

Net Debt 184.014 203.215 180.655 207.171 217.309 200.769 162.850 Net Debt / OIBDA LTM x 1.7 x 1.8 x 1.6 x 1.8 x 1.9 x 1.7 x 1.4

! As a result of Svyazinvest merger in accordance with the Group accounting policy all comparatives were revised for FY2011, FY2012, 43 www.rostelecom.ru FY2013. Quarterly data were revised starting from 4Q2012 as the first comparative period for 4Q2013 Cash Flow Statement

Bln RUR CASH FLOW STATEMENT 1Q 2014 1Q 2013 1H 2013 9M 2013 2013 2012 2011 Cash flows from operating activities Profit before income tax 9.237 8.289 16.713 29.201 32.119 42.503 47.478 Adjustments to reconcile profit before taх to cash generated from operations: Depreciation and amortization 14.514 17.865 34.135 50.951 68.414 66.511 59.322 Loss on sale of property, plant and equipment 0.092 0.065 0.031 0.148 0.344 0.752 0.829 Impairment losses /(reversal of impairment losses) Finance costs excluding finance costs on pension and other lt social liabilities 3.993 3.789 7.396 11.102 15.031 15.332 13.547 Other non-cash (gains) / loss Other investing and financing gains (1.685) (0.828) (0.558) (4.146) (3.457) (4.408) (2.194) Other cash flows from operating activities 1.258 0.609 1.274 2.186 2.537 0.847 0.812 Share-based payment expenses 0.018 0.588 Changes in net working capital: 0.655 (1.469) 1.292 (8.124) (7.737) (1.328) (13.823) Cash generated from operations 28.064 28.320 60.283 81.318 107.251 120.227 106.559 Interest paid (4.322) (4.023) (8.270) (12.639) (17.083) (16.292) (12.461) Income tax paid (1.036) (2.648) (4.646) (4.896) (4.474) (7.301) (9.316) Net cash provided by operating activities 22.706 21.649 47.367 63.783 85.694 96.634 84.782 Cash flows from investing activities Purchase of PPE and intangible assets (9.959) (25.112) (32.673) (47.101) (68.487) (93.665) (87.905) Proceeds from sale of property, plant and equipment 0.290 0.315 0.667 0.920 1.641 2.727 2.167 Acquisition of financial assets (0.121) (2.061) (3.718) (11.244) (11.925) (9.725) (7.497) Proceeds from disposals of financial assets 1.508 4.332 5.671 6.963 16.443 9.855 10.403 Purchase of subsidiaries, net of cash acquired (0.021) (0.021) (0.021) (0.047) (1.507) (32.281) Other cash flows from investing activities 0.065 0.003 0.012 0.258 0.446 0.472 2.164 Acquisition of equity accounted investees (0.020) Net cash used in investing activities (8.216) (22.544) (30.062) (50.225) (61.929) (91.863) (112.949) Cash flows from financing activities Purchase of treasury shares (13.773) (2.820) (2.820) (33.121) (58.376) (22.126) (4.507) Sale of treasury shares 0.815 1.170 6.375 9.372 22.306 5.830 1.782 Proceeds from bank and corporate loans 81.999 97.473 172.833 327.254 509.685 532.983 298.626 Repayment of bank and corporate loans (85.273) (125.494) (219.914) (344.991) (524.430) (492.891) (251.592) Repayment of bonds (0.398) (1.215) (1.613) (1.613) (7.285) (13.932) Proceeds from promissory notes 0.007 22.863 12.050 Repayment of promissory notes (0.007) (0.282) (22.939) (15.984) Dividends paid to shareholders of the Group (0.010) (0.067) (0.427) (5.828) (5.830) (9.169) (0.686) Other cash flows from financing activities (0.004) 24.683 29.258 29.167 29.105 (8.026) (4.182) Net cash used in financing activities (16.246) (5.453) (15.910) (19.760) (29.435) (0.760) 21.575

Net (decrease)/increase in cash and cash equivalents (1.711) (6.342) 1.262 (6.213) (5.669) 3.995 (6.618) Effect of exchange rate changes on cash and cash equivalents 0.046 0.006 0.016 (0.011) (0.000) (0.016) (0.026) Cash and cash equivalents at beginning of year 7.960 13.629 13.629 13.629 13.629 9.634 16.252 Cash and cash equivalents at the end of period 6.249 7.287 14.891 7.416 7.960 13.629 9.634

FCF 12.747 (3.463) 14.694 16.682 17.207 2.969 (3.123)

! As a result of Svyazinvest merger in accordance with the Group 44 www.rostelecom.ru accounting policy all comparatives were revised for FY2011, FY2012, FY2013. Quarterly data were revised starting from 4Q2012 as the first comparative period for 4Q2013 Contact Information

Investor Relations

Office +7 (499) 995 9780 E-mail: [email protected] Web: http://www.rostelecom.ru/en/ir/

45 www.rostelecom.ru