Moscow, Russia – May 27, 2011 – Rostelecom (the “Company”) (MICEX: RTKM, RTKM-002D - RTKM-017D, RTKMP; RTS: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces its development strategy for the period of 2011-2015, which has been approved by the Board of Directors on May 13, 2011.

According to the market research conducted by the Company, the structure of the Russian telecommunications market is currently undergoing significant changes and Rostelecom shall therefore focus on the development of wireline and wireless broadband services for private clients and the corporate services segment, in order to further strengthen the Company’s market positions.

The approved strategy document indicates that the Company expects to generate stable top line growth between 2011-2015, which will be driven by an increase in market share of up to 50% (by the number of subscribers) in the wire-line broadband segment, 22% in the wireless broadband segment and 30% in the pay-TV segment. The projected revenue growth is primarily expected to be achieved through the streamlining of Rostelecom’s sales function, but also through selective investments in the most promising wire-line and wireless broadband business segments and through the expansion of backbone capacity. This increased capacity will allow the Company to offer a broader range of services and higher speed to consumers. Capital investments to revenue ratio is expected to be at the average level of 20% for the 5-year period, primarily in 2011 and 2012. 

Measures that are taken to improve operating efficiency are expected to drive OIBDA margin growth. In accordance with the Company’s financial policy, its net debt to OIBDA ratio will not exceed 2x during the implementation period of the development strategy.

The Development strategy initiatives for 2011-2015 comprise the following objectives:

1.     To develop its mobile business on a federal level with a primary focus on data transmission, including the use of SkyLink resources;

2.     To aggressively develop mass market broadband services;

3.     To expand pay-TV services by transforming the Company from an infrastructure to content provider;

4.     To maintain the traditional fixed line business through service bundling and a differential approach to tariff setting;

5.     To improve Rostelecom's market position in the corporate and public sector segments;

6.     To optimise its services for telecoms operators

7.     To develop its business in Moscow, including the integration of NTK

8.     To increase operational efficiency and capitalise on synergies resulting from the merger;

9.     To integrate the combined entities into a single Rostelecom brand.

Alexander Provotorov, Chief Executive Officer of Rostelecom, commented: “Rostelecom’s new Development strategy will help the Company attaining leading market positions in terms of revenues and subscribers across all segments of the Russian telecommunications sector. Rostelecom intends to become a universal operator, providing a comprehensive range of services to Russian citizens, businesses, the state and other telecommunications operators across Russia”.