Moscow – May 31, 2010:  Rostelecom (RTS, MICEX: RTKM, RTKMP; OTCQX: ROSYY) today announced its audited consolidated financial results for the full year ended December 31, 2009 in accordance with International Financial Reporting Standards (IFRS).

Highlights

- Consolidated revenue for the full year 2009 amounted to RUB 65.5 billion;

- OIBDA* amounted to RUB 12.5 billion, representing an OIBDA margin of 19.1%;

- Net profit amounted to RUB 3.5 billion;

- Revenue from new state-of-the-art services increased by 1.5 times year-on-year to
RUB 10.1 billion and accounted for 15.4% of Rostelecom’s consolidated revenue.

Rostelecom and its subsidiaries, (‘the Company’), delivered the following financial and operating results for the full year 2009:

Revenue and Positioning in Major Markets

The Company’s consolidated revenue for the full year 2009 amounted to RUB 65,510.0 million representing a decrease of 1.7% year-on-year, which is largely attributable to a reduction in revenues from a number of traditional segments.

However, through the continued diversification of its business, the Company has increased its overall revenues from new state-of-the-art services, primarily incorporating Internet access for both operators and corporates, VPN, Data Centre and intelligent network services now representing a greater cumulative share of 15.4% in Rostelecom’s consolidated revenue.

Data transmission services as a standalone (Internet access services for operators (‘wholesale Internet’), and corporate clients, as well as VPN, Data Center and VoIP services) rose substantially by 65.8% to RUB 9,014.0 million. By the end of 2009, the Company’s share in the wholesale Internet services market reached 36%, while its share in the VPN services market surged to 46%.

The Company’s positions in the traditional voice telecom segments during 2009 can be characterised as follows:

Domestic long-distance (DLD) revenues fell by 11.5% to RUB 26,212.0 million.

Revenues from international long-distance (ILD) services to Russian end-customers and operators amounted to RUB 11,334.0 million, a fall of 6.2% year-on-year.

Total revenues from international operators for incoming ILD telephone traffic transit and termination dropped by 3.3% year-on-year to RUB 6,236.0 million.

The decrease in DLD and ILD revenue is primarily attributable to the overall reduction in volume of the fixed-line long-distance market as a result of the weakened global macro-economic environment, growing competition as well as the continued migration of long-distance, end-customer traffic from fixed-line to mobile networks.

Nevertheless, at the end of 2009, the Company’s share in the market of fixed-line DLD/ILD services to Russian residential & corporate end-customers remained relatively stable and amounted to more than 50%, compared to 2008. In the residential fixed-line DLD/ILD service market as a standalone, the Company continues to have a dominant position maintaining an 81% market share at the end of 2009.

Revenues from leased-line services fell by 9.8% year-on-year to RUB 6,958.0 million. This fall is mainly attributable to the fact that Russian operators, (mobile and inter-regional), have a reduced demand for channels from the Company, as they near completion in the construction of their own networks.

Operating Expenses

Total operating expenses for 2009 amounted to RUB 61,246.0 million, an increase of 2.4% year-on-year. This was primarily due to higher payments made to international operators (mostly as a result of the devaluation of the Russian Rouble).

OIBDA, Operating Profit

In 2009, OIBDA fell by 12.5% year-on-year to RUB 12,491.0 million representing an OIBDA margin of 19.1%.

Depreciation charges for 2009 amounted to RUB 7,580.0 million, rising 5.7% year-on-year, in part due to the rapid growth of investment into the development of Rostelecom’s IP/MPLS network, as well as IT infrastructure for the provision of new state-of-the-art services.

The Company’s full year 2009 operating profit fell by 37.5% year-on-year to RUB 4,264.0 million, with an operating margin of 6.5%.

Other Income/Loss, Profit before Income Tax

Other income for the full year 2009 amounted to RUB 409.0 million compared to
RUB 9,324.0 million in 2008, (see Appendix I). This difference is largely attributable to the significant additional income realised following the sale of investments in 2008.

In February 2008, OJSC Rostelecom sold its stake in Golden Telecom, Inc. and the profit from this transaction before tax amounted to RUB 8,666.0 million.

The Company’s profit before income tax for 2009 thus amounted to RUB 4,677.0 million, compared to RUB 16,073.0 million in 2008.

Net profit 

In 2009 the Company’s consolidated net profit fell by 71.6% to RUB 3,456.0 million. Net margin stood at 5.3%.

Appendices:

1. Condensed consolidated statements of comprehensive income for the full year ended
December 31, 2009 and December 31, 2008 in RUB million;

2. Condensed consolidated statements of financial position as of December 31, 2009 and December 31, 2008 in RUB million. 

* OIBDA is a non-U.S. GAAP and non-IFRS financial measure, which the Company defines as operating income before depreciation, amortization, loss from impairment of PP&E, goodwill and other intangible assets as well as loss on disposal of PP&E. We believe that OIBDA provides useful information to investors because it is an indicator of the strength and performance of our business operations, including our ability to finance capital expenditures, acquisitions and other investments and our ability to incur and service debt.  OIBDA should not be considered in isolation as an alternative to net income, operating income or any other measure of performance under U.S. GAAP or IFRS.