DGAP-UK-Regulatory: Rostelecom OJSC Long-Distance and International Telecommunications (spons. ADRs)

EQS-Regulatory: Rostelecom ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE THIRD QUARTER AND NINE MONTHS OF 2016

PJSC ROSTELECOM / 3rd Quarter Results ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE THIRD QUARTER AND NINE MONTHS OF 2016

10-Nov-2016 / 12:01 CET/CEST Dissemination of a Regulatory Announcement, transmitted by EquityStory.RS, LLC - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement.

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ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE THIRD QUARTER AND NINE MONTHS OF 2016

Higher revenues driven by a substantial increase in the digital segment's contribution to overall revenue

Moscow, Russia - November 10, 2016 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia's national telecommunications operator, today announces its consolidated financial results for the third quarter and nine months of 2016 prepared in accordance with IFRS[1].

KEY ACHIEVEMENTS

- Revenue grew by 0.4% to RUB 72.8 billion compared to the third quarter of 2015;

- Net income doubled to RUB 4.1 billion in the third quarter of 2016;

- Solid OIBDA margin of 34.4% in the third quarter of 2016;

- Higher digital segment[2] share of revenue of 44%;

- Rostelecom accounted for around 40%[3] of new subscriptions in the pay- TV market and over 50%[4] in the broadband market;

- Total fibre optic network coverage reached 31.8 million households by the end of the third quarter of 2016;

- Maintained high level of subscriber growth rate (+7%) for broadband and IPTV (+28%).

THIRD QUARTER 2016 FINANCIAL HIGHLIGHTS

- Revenue grew by 0.4% to RUB 72.8 billion compared to the third quarter of 2015;

- OIBDA[5] fell by 1% to RUB 25.0 billion compared to the third quarter of 2015;

- OIBDA margin of 34.4% compared to 34.7% in the corresponding period of last year;

- Net profit doubled to RUB 4.1 billion compared to the third quarter of 2015;

- CAPEX[6] decreased by 18% year-on-year to RUB 13.0 billion (17.9% of revenue) from RUB 16.0 billion (22.0% of revenue) in the third quarter of 2015;

- Free Cash Flow (FCF)[7] fell by 9% to RUB 5.9 billion compared to the third quarter 2015;

- Net debt[8] increased by 9% since the beginning of 2016, amounting to RUB 190.1 billion, resulting in a Net Debt / Annualised OIBDA ratio of 1.9x.

Key figures for 3Q 2016

RUB million 3Q 2016 3Q 2015 % change, y-o-y

Revenue 72,781 72,496 0.4% OIBDA 25,038 25,182 (1%) OIBDA margin % 34.4% 34.7% Operating Income 11,815 9,945 19% Operating margin % 16.2% 13.7% Net Income 4,060 2,046 98% % of revenue 5.6% 2.8% Capital Expenditure 13,029 15,978 (18%) % of revenue 17.9% 22.0% Net debt 190,071 174,899 9% Net debt/ annualised OIBDA 1.9 1.7 FCF 5,851 6,420 (9%)



NINE MONTHS OF 2016 FINANCIAL HIGHLIGHTS

- Revenue grew by 0.3% to RUB 217.0 billion, compared to the nine months of 2015;

- OIBDA fell by 4% to RUB 72.4 billion compared to the nine months of 2015;

- OIBDA margin of 33.4% compared to 34.7% in the nine months of 2015;

- Net profit fell by 16% to RUB 8.7 billion compared to the nine months of 2015;

- CAPEX increased by 8% year-on-year to RUB 46.8 billion (21.6% of revenue) from RUB 43.4 billion (20.1% of revenue) in the nine months of 2015;

- Free Cash Flow (FCF) was RUB -2.3 billion compared to RUB 12.9 billion in the corresponding period of last year.



Key figures for the nine months of 2016

RUB million 9M 2016 9M 2015 % change, y-o-y

Revenue 217,039 216,336 0.3% OIBDA 72,400 75,027 (4%) OIBDA margin % 33.4% 34.7% Operating Income 28,588 29,328 (3%) Operating margin % 13.2% 13.6% Net Income 8,663 10,274 (16%) % of revenue 4.0% 4.7% Capital Expenditure 46,797 43,383 8% % of revenue 21.6% 20.1% Net debt 190,071 174,899 9% Net debt/ annualised 1.9 1.7 OIBDA FCF (2,320) 12,888 -



Sergei Kalugin, President of Rostelecom, commented:

'Our third quarter results were robust, both from a financial and operational perspective. We are delighted with the successful on-going transformation of the business, as well as the extent to which the digital segment is growing, driven by an increasing number of broadband and IPTV clients as well as sales in cloud services and other digital segments. This combination has led to an increase in revenue and profit, enabling Rostelecom to generate high margins and solid cash flow.

'We accomplished a number of important milestones during the quarter. Firstly, within the framework of an MVNO agreement, we commercially launched our own-brand mobile services based on the Tele2 network. This gives customers access to Rostelecom's mobile proposition through the Tele2 network across the country, it will strengthen customer loyalty in the B2C segment and bolster our position in the corporate and state user segments.

'Furthermore, the Board of Directors has approved a new LTIP programme, which provides each employee with the opportunity to become a shareholder, and benefit from the Company's increasing success and shareholder value growth. This will provide employees with a real sense of ownership, which will contribute to increased productivity and a more rapid transformation into a digital service provider.

'Finally, the Board of Directors has approved another important initiative to enhance efficiency and profitability - the introduction of a new production system based on 6 SIGMA and Lean Production approach, which we expect to help us increase productivity by 20-30%, depending on the business area function, and realise a 5-10% reduction in operating costs'

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

'We are pleased with the third quarter results, particularly the underlying performance of the business, which demonstrate that management initiatives are delivering results: our consolidated revenue is growing, despite the fall in income from voice services. OIBDA is stable, despite tough competition and inflation. There are however grounds for being conservative, due to the difficult macroeconomic environment and there is significant risk that state reimbursement for the Bridging the Digital Divide project will be reduced.

In terms of guidance, we therefore expect up to 1% year-on-year revenue growth for the full year, and we expect a lower year-on-year OIBDA range of between 4-6% compared to 2015. The impact of the lower reimbursement for the BDD project is expected to be offset by success in optimising operating expenses and increase revenue from digital services. We expect full year CAPEX of less than 19% of revenues (excluding the Bridging the Digital Divide project 'BDD').'



KEY OPERATING HIGHLIGHTS

1. The number of broadband subscribers grew by 7% year-on-year to 12.2 million in 3Q 2016;

- The B2C subscriber base grew by 7% to 11.4 million, whilst the number of subscribers connected by fibre optic increased by 21% year-on-year to 7.1 million (59% of the subscriber base).

2. The number of pay-TV subscribers grew by 9% year-on-year to 9.2 million households.

- The number of IPTV subscribers increased by 28% to 4.0 million.

3. The number of local telephony subscribers decreased by 8% to 20.9 million.



Number of 3Q 2016 3Q 2015 % change, 2Q 2016 % change, subscribers y-o-y y-o-y (million):

Broadband 12.2 11.4 7% 12.0 2% Residential 11.4 10.7 7% 11.2 2% Corporate 0.7 0.7 3% 0.7 1% clients Pay TV 9.2 8.4 9% 9.0 2% Incl. IPTV 4.0 3.1 28% 3.9 5% Local telephony 20.9 22.7 (8%) 21.3 (2%) services



KEY EVENTS RELATING TO 3Q 2016 AND AFTER THE END OF THE REPORTING PERIOD

Business news

- Expanding the range of services:

- Began providing mobile services under its own brand based on the Tele2 network under an MVNO agreement; now Rostelecom customers can access the Rostelecom mobile proposition through the Tele2 network across the country;

- Rostelecom launched a federal Wi-Fi service for corporate clients and the public sector;

- Rostelecom updated the 'Gaming' tariff plan to include premium accounts; and

- Rostelecom launched a new IPTV smartphone app.

- Rostelecom remains a preferred and reliable partner to the state:

- Rostelecom organised video surveillance for the State Duma elections in 15 Russian regions; the total value of the contracts was more than RUB 500 million;

- Rostelecom won a RUB 43 million tender to introduce the domestic 'MyOffice Mail' product for the Moscow Department for Information Technology;

- On-going work on modernising the network infrastructure to ensure high quality digital services:

- Increased fibre optic network coverage to 31.8 million households;

- Rostelecom launched a sub-marine fibre optic link from Sakhalin - Kamchatka - Magadan. Now almost 500,000 inhabitants in the Kamchatka Krai and Magadan region, who had previously received their service via satellite, can enjoy unlimited high-speed internet;

- Rostelecom maintains a large and stable share of total new connections. The Company continues to strengthen its competitive position in the broadband and pay-TV market, attracting around 40%[9] of all new subscribers in the pay-TV market and more than 50%[10] in the broadband market for the third quarter;

- As part of its initiative to develop new fast growing business segments to drive revenue, Rostelecom launched a new teleshopping channel BOOM- TV, created in the JV framework with South Korean partners;

- Rostelecom concluded a number of major contracts totalling RUB 1.8 billion to broaden the digital business segment. This includes a contract with the federally funded Judicial Department's information analytics centre, as well as contracts related to 'Smart City' projects, VPN and others;

- Rostelecom signed long-term contracts with MTS, Vimpelcom and Megafon for the lease of its network infrastructure, thereby monetising its leading position as the major telecoms infrastructure operator in the country.



Other news

- The Company further optimised its debt portfolio by successfully completing a RUB 15 billion bond placement, with a record low coupon rate of 9.2%;

- To accelerate Rostelecom's transformation into a digital services provider, the Board of Directors approved a new long-term incentivisation programme for employees to provide a greater sense of ownership in the business and to incentivise success. The Company also introduced a new corporate pension scheme.

- To reinforce the Company's evolution into a digital services provider, the Company has also reviewed its production systems based on the tools and techniques of Lean Production and 6 SIGMA, which will increase productivity and reduce operating costs;

- Noting the improving macroeconomic situation in the country, Fitch and S&P upgraded the Company's outlook to Stable for Rostelecom's credit ratings;



OPERATING REVIEW

Revenue analysis

Revenue structure by services

RUB million 3Q 3Q % 9M 2016 9M 2015 % 2016 2015 change, change, y-o-y y-o-y

Broadband 16,497 15,910 4% 49,501 47,385 4% TV services 5,971 4,862 23% 17,312 14,198 22% Fixed telephony 21,219 24,150 (12%) 66,113 75,107 (12%) Wholesale services 19,143 18,987 1% 57,098 55,544 3% Rent of channels 2,566 2,899 (12%) 8,056 8,801 (8%) Interconnection and 8,122 8,053 1% 24,247 23,135 5% traffic transit services VPN 5,290 4,976 6% 15,492 14,410 8% Rent and maintenance 3,165 3,059 3% 9,303 9,198 1% of telecommunications infrastructure VAS and cloud services 4,498 3,127 44% 11,846 8,315 42% Other 3,413 3,287 4% 9,799 10,374 (6%) telecommunications services Other non- 2,040 2,173 (6%) 5,370 5,413 (1%) telecommunications services Total 72,781 72,496 0.4% 217,039 216,336 0.3%



Revenue structure by customer segments

RUB million 3Q 2016 3Q 2015 % 9M 2016 9M 2015 % change, change, y-o-y y-o-y Residential 32,634 33,086 (1%) 99,083 100,933 (2%) customers Corporate 13,573 13,976 (3%) 39,211 40,857 (4%) customers Government 12,781 11,698 9% 37,305 34,355 9% customers Operators 13,793 13,736 0% 41,440 40,191 3% Total 72,781 72,496 0.4% 217,039 216,336 0.3%



In the third quarter of 2016, revenue increased by 0.4% to RUB 72.8 billion compared to the third quarter of 2015. Revenue was influenced by the following factors:

- a 44% increase in revenue from VAS and cloud services due to an increase in the data-centres business, cloud services and the development of the 'Smart City' projects;

- 23% increase in revenue from pay-TV due to growth in the IPTV subscriber base, an increase in the consumption of VoD services and higher ARPU;

- a 4% increase in revenue from broadband services due to an increased number of subscribers;

- a 12% decrease in revenue from fixed-line telephony services.

In the nine months of 2016, revenue increased by 0.3% year-on-year to RUB 217.0 billion as a result of the following factors:

- a 42% increase in revenue from VAS and cloud services due to an increase in cloud services, data centre services and the development of the 'Smart City' projects;

- a 22% increase in revenue from pay-TV services due to growth in the IPTV subscriber base, an increase in the consumption of VoD services and higher ARPU;

- a 4% increase in revenue from broadband services due to an increased number of subscribers;

- a 12% decrease in revenue from fixed-line telephony services.



Operating income analysis

Operating expenses structure[11]

RUB million 3Q 2016 3Q 2015 % 9M 2016 9M 2015 % change, change, y-o-y y-o-y

Personnel costs (21,750) (21,416) 2% (68,474) (68,511) (0%)

Interconnection (12,241) (12,264) (0%) (36,704) (34,395) 7% charges

Materials, (5,998) (5,821) 3% (17,304) (17,382) (0%) repairs and maintenance, utilities

Gain on the 402 236 70% 1,363 724 88% disposal of PPE and intangible assets

Reserves for (935) (785) 19% (2,675) (1,978) 35% bad debt expenses

Other operating 2,741 3,705 (26%) 10,226 10,797 (5%) income

Other operating (10,419) (11,381) (8%) (32,676) (31,802) 3% expenses

Total operating (48,200) (47,725) 1% (146,204) (142,546) 3% expenses



In the third quarter of 2016, operating expenses, excluding amortisation, increased by 1% to RUB 48.2 billion compared to the corresponding period of 2015. This is mainly due to a decrease in operating income from the 'Bridging the Digital Divide' project, accompanied by a reduction in associated costs under other operating expenses, and growth in personnel costs because of one-off payments.

In the nine months of 2016, operating expenses excluding amortisation increased by 3% to RUB 146.2 billion, compared with the same period last year. This was influenced by the following factors:

- a 7% increase in interconnection charges, partly as a result of a larger pay-TV subscriber base, leading to higher content costs as well as increased interconnection costs;

- a 3% increase in other operating expenses, including increased expenses related to the 'Smart City' projects and others, accompanied by growth in corresponding income;

- a 35% increase in reserves for bad debt expenses mainly due to one-off effect from the rate adjustment method of collecting receivables in the second quarter of 2016;

Depreciation and amortisation expenses decreased by 14% year-on-year in the third quarter of 2016 and by 5% in the nine months of 2016 to RUB 12.8 billion and RUB 42.2 billion, respectively. The decrease is mainly due to a revision in the useful life of fixed assets.

Operating profit in the third quarter of 2016 grew by 19% to RUB 11.8 billion, compared to the corresponding period last year. For the 9 months of 2016 operating profit declined by 3% to RUB 28.6 billion.

OIBDA in the third quarter of 2016 fell by 1%, and by 4% year-on-year in the nine months of 2016, to RUB 25.0 billion and RUB 72.4 billion, respectively. The OIBDA margin was 34.4% in the third quarter compared to 34.7% in the corresponding period of 2015; in the nine months of 2016 the OIBDA margin was 33.4% (34.7% in the nine months of 2015).



Net Income Analysis

In the third quarter of 2016, profit before income tax grew by 69% and amounted to RUB 6.0 billion and for 9 months to RUB 12.0 billion compared to RUB 14.3 billion in the nine of 2015.

Profit before tax in the third quarter of 2016 was mainly influenced by the following factors:

- higher level of operating profit;

- the third quarter of 2015 higher comparable base of losses following the revaluation of financial instruments;

- positive foreign exchange rate differences in the reporting period;

- consolidation of losses from affiliated companies, mainly relating to the financial results of the JV with Tele2 Russia.

Profit before income tax in the nine months of 2016, was mainly influenced by the consolidation of losses from affiliated companies, mainly relating to the financial results of the JV with Tele2 Russia, lower losses from the revaluation of financial instruments and positive foreign exchange rate differences.

In the third quarter of 2016, income tax increased 29% year-on-year and amounted to RUB 1.9 billion. The Company's income tax contributions during the nine months of 2016 decreased by 16% to RUB 3.4 billion. The income tax dynamics were a result of an income profit before tax.

The effective income tax rate was 32% in the third quarter of 2016 and amounted to 28% in the nine months of 2016, compared to the 20% rate specified by the Tax Code. The higher effective tax rate was due to the presence of expenses that are non-deductible for tax purposes.

Net profit grew by 98% and amounted to RUB 4.1 billion in the third quarter of 2016. In the nine months of 2016, net profit totalled RUB 8.7 billion compared to RUB 10.3 billion in the nine months of 2015.



Financial review

Consolidated net operating cash flow amounted to RUB 18.2 billion in the third quarter of 2016, compared to RUB 22.0 billion in the corresponding period of 2015, totalling RUB 42.3 billion in the nine months of 2016, compared to RUB 54.7 billion during the nine months of 2015. The reduction in net operating cash flow in the third quarter of 2016 was due to the higher level of accounts receivable, a decrease in accounts payable, an increase in interest paid as well as a decrease in proceeds from the Bridging the Digital Divide project. The presence of significant recoveries of income tax in the third quarter of 2016 had a positive impact on cash flow value. The reduction in consolidated net operating cash flow for the first 9 months of 2016 largely accounted for an increase in accounts receivable and interest paid.

In the third quarter of 2016, consolidated free cash flow amounted to RUB 5.9 billion compared to RUB 6.4 billion in the third quarter of 2015. Consolidated free cash flow in the nine months of 2016 was RUB (2.3) billion compared to RUB 12.9 billion in the nine months of 2015.

Consolidated cash outflow for investments in fixed assets in the third quarter of 2016 decreased by 18% year-on-year to RUB 13.0 billion, increasing by 8% to RUB 46.8 billion for the nine months of 2016 compared to the corresponding period last year. This was due to CAPEX being unevenly distributed across the calendar year, in the current financial year the volume of investments was weighted in the first half.

As at the 30th of September 2016, the Group's total debt grew by 7% since the full year of 2015, to RUB 200.4 billion. More than 99% of the Group's total debt was rouble-denominated as at 30th September 2016.

As at 30th September, 2016 the Group's net debt amounted to RUB 190.1 billion with a net debt / OIBDA annualised ratio of 1.9x.



OTHER INFORMATION: CONFERENCE CALL

Rostelecom's management will hold a conference call and webcast today at 6.00 PM (Moscow), 4.00 PM (CET), 3.00 PM (UK) and 10.00 AM (NYT). To participate in the conference call, please dial:

Russia +7 495 213 1767 UK/ International: +44(0) 330 336 9105 US: +1 719 325 2229

Access Code: 7823005

A webcast of the conference call will be available at: http://www.audio- webcast.com/cgi-bin/visitors.ssp?fn=visitor&id=4031.

A replay of the conference call will be available on the Company's website http://www.rostelecom.ru/en/ir/results_and_presentations/financials/IFRS/ 2016/3/ in due course.

* * *



APPENDICES

1. Reconciliation of OIBDA

2. Statement of Comprehensive Income for 9M 2016

3. Statement of Cash Flows for 9M 2016

4. Statement of Financial Position for 9M 2016

APPENDIX 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 as well as non-cash expenses. 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.

Non-cash expenses related to the long-term management incentive programme, implying accruals in personnel costs line starting from Q2, 2014, are not taken into account in the calculation of OIBDA.



RUB million 3Q 2016 3Q 2015 % 9M 2016 9M 2015 % change, change, y-o-y y-o-y

Operating 11,815 9,945 19% 28,588 29,328 (3%) income

Plus 12,766 14,826 14% 42,247 44,461 (5%) amortisation

Plus non-cash 457 411 11% 1,565 1,238 26% expenses related to the long-term management incentive programme

OIBDA 25,038 25,182 (1%) 72,400 75,027 (4%)

OIBDA margin, 34.4% 34.7% 33.4% 34.7% %



APPENDIX 2: Statement of Comprehensive Income for 9M 2016

Three-month period ended 30 September (unaudited) 2016 2015

Revenue 217,039 216,336

Operating expenses Wages, salaries, other (68,474) (68,511) benefits and payroll taxes Depreciation, amortization (42,247) (44,461) and impairment losses Interconnection charges (36,704) (34,395) Materials, utilities, (17,304) (17,382) repairs and maintenance Gain on disposal of 1,363 724 property, plant and equipment and intangible assets Bad debt expense (2,675) (1,978) Other operating income 10,266 10,797 Other operating expenses (32,676) (31,802) Total operating expenses, (188,451) (187,008) net Operating profit 28,588 29,328

Loss from associates (5,004) (2,302) Finance costs (12,724) (12,026) Other investing and 640 108 financial gain/(loss), net Foreign exchange gain/ 547 (802) (loss) Profit before income tax 12,047 14,306 Income tax expense (3,384) (4,032) Profit for the period 8,663 10,274

Other comprehensive income Items that may be reclassified subsequently to profit or loss: Exchange differences on (417) 257 translating foreign operations, net of tax Other comprehensive income (417) 257 for the period, net of tax Total comprehensive income 8,246 10,531 for the period

Profit attributable to: Equity holders of the Group 8,253 9,924 Non-controlling interests 410 350 Total comprehensive income attributable to: Equity holders of the Group 7,834 10,157 Non-controlling interests 412 374

Earnings per share 3.68 4.39 attributable to equity holders of the Group - basic (in roubles) Earnings per share 3.64 4.33 attributable to equity holders of the Group - diluted (in roubles)



APPENDIX 3: Statement of Cash Flows for 9M 2016

Nine-month period

ended 30 September (unaudited) 2016 2015 Cash flows from operating activities Profit before tax 12,047 14,306 Adjustments to reconcile profit before tax to cash generated from operations: Depreciation, amortization and 42,247 44,461 impairment losses Gain on disposal of property, plant (1,363) (724) and equipment and intangible assets Bad debt expense 2,675 1,978 Loss from associates 5,004 2,302 Finance costs excluding finance 12,366 11,473 costs on pension and other long-term social liabilities Other investing and financial gain (640) (108) Foreign exchange (gain)/loss, net (547) 802 Share-based motivation program 1,184 938 Changes in net working capital: Increase in accounts receivable (9,258) (6,919) Increase in employee benefits 128 147 (Increase)/decrease in inventories (615) 1,523 Decrease in accounts payable, (2,142) (2,311) provisions and accrued expenses Decrease in other assets and (1,932) (211) liabilities Cash generated from operations 59,154 67,657 Interest paid (14,383) (12,590) Income tax refund 1,395 2,260 Income tax paid (3,822) (2,653) Net cash from operating activities 42,344 54,674

Cash flows from investing activities Purchase of property, plant and (46,797) (43,383) equipment and intangible assets Proceeds from sale of property, 2,133 1,597 plant and equipment and intangible assets Acquisition of financial assets (5,737) (10,250) Proceeds from disposals of financial 6,376 5,890 assets Interest received 827 705 Dividends received 20 5 Purchase of subsidiaries, net of (2,438) (464) cash acquired Proceeds from disposals of equity - 322 accounted investees Proceeds from disposals of (1) - subsidiaries, net of cash disposed Acquisition of equity accounted (778) (98) investees Net cash used in investing (46,395) (45,676) activities

Cash flows from financing activities Purchase of treasury shares - (2,867) Sale of treasury shares 8 - Proceeds from bank and corporate 496,127 368,768 loans Repayment of bank and corporate (492,822) (376,378) loans Proceeds from bonds 15,000 10,000 Repayment of bonds (2,734) (2,408) Repayment of vendor financing (7) (44) payable Repayment of other non-current - (3) financing liabilities Options settlement repayments (231) (448) Repayment of finance lease (116) (56) liabilities Acquisition of non-controlling - (2,079) interest Dividends paid to shareholders of (13,295) (7,676) the Group Dividends paid to non-controlling (248) (287) shareholders of subsidiaries Net cash used in financing 1,682 (13,478) activities

Net decrease in cash and cash (2,738) (4,479) equivalents Effect of exchange rate changes on (369) 1 cash and cash equivalents Cash and cash equivalents at 7,165 16,945 beginning of the period Cash and cash equivalents at the end 4,427 12,466 of the period



APPENDIX 4: Statement of Financial Position for 9M 2016

30 September 2016 31 December (unaudited) 2015 Assets Non-current assets Property, plant and 334,580 338,699 equipment Investment property 99 107 Goodwill and other 60,730 60,755 intangible assets Investments in associates 70,205 74,474 Other financial assets 845 621 Deferred tax assets 620 627 Other non-current assets 9,821 8,241 Total non-current assets 476,900 483,524

Current assets Inventories 4,709 4,060 Trade and other accounts 50,337 43,152 receivable Prepayments 2,140 2,822 Prepaid income tax 2,870 927 Other financial assets 5,913 5,719 Cash and cash equivalents 4,427 7,165 Other current assets 2,063 2,600 Total current assets 72,459 66,445 Held for sale assets 1,727 1,351 Total assets 551,086 551,320

Equity and liabilities Equity attributable to equity holders of the Group Share capital 93 93 Additional paid-in capital 90 87 Treasury shares (66,932) (68,669) Retained earnings and other 308,238 314,237 reserves Total equity attributable 241,489 245,748 to equity holders of the Group Non-controlling interests 4,246 3,916 Total equity 245,735 249,664

Non-current liabilities Loans and borrowings 140,543 126,620 Employee benefits 5,522 5,021 Deferred tax liabilities 33,175 30,238 Accounts payable, 5,018 3,545 provisions and accrued expenses Other non-current 5,908 5,543 liabilities Total non-current 190,166 170,967 liabilities

Current liabilities Loans and borrowings 59,868 59,934 Accounts payable, 48,367 62,268 provisions and accrued expenses Income tax payable 42 215 Other current liabilities 6,908 8,272 Total current liabilities 115,185 130,689 Total liabilities 305,351 301,656 Total equity and 551,086 551,320 liabilities



Rostelecom (www.rostelecom.ru) is one of the largest national telecommunications operators in Russia and Europe. The Company operates in all segments of the telecommunications market and covers millions of households in Russia.

Rostelecom is an undisputable leader of the broadband and pay-TV markets in Russia with over 12.2 million fixed-line broadband subscribers and over 9.2 million pay-TV subscribers, over 4.0 million of which are subscribed to Rostelecom's IPTV services.

In the nine months of 2016 the Group generated RUB 217.0 billion of revenue, RUB 72.4 billion of OIBDA (33.4% of revenue) and RUB 8.7 billion of net income.

The Group is a market leader in providing telecommunications services to government bodies and corporates of all levels.

Rostelecom is an important innovator that provides solutions in the field of E-Government, cloud computing, healthcare, education, security and housing & utility services.

The Group's stable financial position confirmed by its credit ratings. Rostelecom was assigned 'BBB-' and 'BB+' international credit ratings by Fitch Ratings and Standard&Poor's respectively.

* * *

Certain statements in this press release are forward-looking statements within the meaning of the U.S. federal securities laws and intended to be covered by the safe harbours created thereby.

Those forward-looking statements include, but are not limited to: - Assessment of Rostelecom's PJSC (the Company) future operating and financial results as well as forecasts of the present value of future cash flows and related factors;

- The Company's plans to take ownership stakes in other organisations;

- 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 forecasts on 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 upon the annual report publication or to reflect the occurrence of unanticipated events, except as may be required under applicable laws.



Note: This announcement contains inside information. Full name and position making the announcement - Pavel Nezhutin, Director of Corporate Governance Department.

[1] International financial reporting standards.

[2] The digital segment comprises broadband, pay-TV, VPN, VAS and cloud services

[3] Company data, estimates from the analytical agency TMT-consulting

[4] Company data, estimates from the analytical agency TMT-consulting

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

[6] Here and below, capital expenditure ('CAPEX') comprises cash spent on fixed assets and intangible assets

[7] Here and below, FCF is calculated as free cash flow from operating activity minus CAPEX, plus proceeds from selling fixed assets and intangible assets

[8] Here and below, net debt is calculated as total debt less cash, cash equivalents and short-term investments (other financial assets)

[9] Company data, estimates from the analytical agency TMT-consulting

[10] Company data, estimates from the analytical agency TMT-consulting

[11] Excluding amortisation

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Language: English Company: PJSC ROSTELECOM 30 Goncharnaya st. 115172 Moscow Russia Phone: +7 (499) 999-82-83 Fax: +7 (499) 999-82-22 E-mail: rostelecom@rt.ru Internet: www.rostelecom.ru ISIN: US7785291078 Listed: Foreign Exchange(s) Moscow Category Code: QRT TIDM: RKMD Sequence Number: 3583 Time of Receipt: 10-Nov-2016 / 12:00 CET/CEST End of Announcement EquityStory.RS, LLC News Service ---------------------------------------------------------------------------

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