Moscow – June 18, 2010:  Rostelecom (RTS, MICEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announced its unaudited consolidated financial results for the first quarter of 2010 in accordance with International Financial Reporting Standards (IFRS).

- Cînsolidated revenue for the first quarter of 2010 amounted to RUB 14.9 billion;

- OIBDA*  amounted to RUB 2.7 billion, representing an OIBDA margin of 18.3%;

- Net profit amounted to RUB  0.6 billion;

- Revenues from new state-of-the-art services increased to RUB 2.8 billion and accounted for an increased proportion of the Company’s consolidated revenue at 18.4%.

For the first quarter of 2010, Rostelecom and its subsidiaries, (‘the Company’), delivered the following financial and operating results:

The Company's consolidated revenue for the first quarter of 2010 amounted to
RUB 14,937.0 million, a decrease of 8.8% year-on-year, which was largely due to a reduction in revenues from traditional long-distance services. However, through the continued diversification of its business, the Company has increased 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, so they have now come to represent an increased cumulative share of 18.4% in the Company’s consolidated revenue.

Data transmission services as a standalone, including Internet access services for operators (‘wholesale Internet’) and corporate clients, as well as VPN, Data Center and VoIP services, grew by 15.5% year-on-year to RUB 2,482.0 million.

The Company’s positions in the traditional voice telecom segments during the first quarter of 2010 can be characterised as follows:

Domestic long-distance (DLD) revenues fell by 11.7% to RUB 6,039.0 million. Revenues from international long-distance (ILD) services to Russian end-customers and operators amounted to RUB 2,387.0 million, a fall of 10.8% year-on-year.

The decrease in DLD and OILD revenues is primarily attributable to the continued migration of long-distance end-customer traffic from fixed-line to mobile networks as well as a decreased volume of traffic from the ‘Big Three’ mobile operators through Rostelecom’s network, as they are nearing completion in the construction of their own long-distance networks.

Total revenues from international operators for incoming ILD telephone traffic transit and termination dropped by 23.3% year-on-year to RUB 1,308.0 million. This was mainly due to the decrease in incoming ILD traffic that terminated in Russia as a result of increased competition from mobile operators.

Revenues from leased-line services fell by 20.3% year-on-year to RUB 1,472.0 million. This fall was mainly attributable to the fact that Russian mobile operators are coming close to completing the construction of their own networks, thus reducing their demand for channels. In addition, this has given these operators the opportunity to provide channels for rent, thus resulting in increased competition in the Russian leased line market.

Operating expenses

The Company’s total operating expenses in the first quarter of 2010 decreased by 8.9% year-on-year to RUB 14,100.0 million. This decrease is primarily related to a reduction in direct costs – amongst other things, lower payments made to both Russian and international operators.

In the first quarter of 2010 there was also a decrease in staff costs – in particular, as a result of a reduction in staff at OJSC Rostelecom and its subsidiaries by 6% compared to last year. On March 31, 2010 the Company’s headcount stood at 20,953 employees compared to 22,300 employees at March 31, 2009.

OIBDA, Operating Profit

In the first quarter of 2010, OIBDA dropped by 2.8% year-on-year to RUB 2,732.0 million, while an OIBDA margin increased to 18.3% compared to 17.2% for the same period last year. This increase reflects the increased share in the Company’s consolidated revenue that new state-of-the-art services contribute to.

Depreciation charges for the first quarter of 2010 amounted to RUB 1,887.0 million, a year-on-year decrease of 1.2%.

The Company’s first quarter 2010 operating profit fell by 6.7% year-on-year to RUB 837.0 million, with an operating margin of 5.6%.

Other Income/Loss, Profit before Income Tax

Other loss (net) for the first quarter of 2010 amounted to RUB 115.0 million compared to other income (net) of RUB 354.0 million in the same period a year ago (see Appendix I). This difference is mainly due to a significant foreign exchange loss over the accounting period.

The Company’s profit before income tax for the first quarter of 2010 thus amounted to RUB 734.0 million, compared to RUB 1,268.0 million in the first quarter of 2009.

Net profit

The Company’s first quarter 2010 consolidated net profit decreased by 31.8% compared to the same period in 2009 and amounted to RUB 579.0 million, with the  net margin standing at 3.9%.

Consolidation

Consolidated numbers for the first quarter of 2010 include the results of the operations of OJSC Rostelecom and its subsidiaries: GlobalTel, Globus-Telecom, Zebra Telecom, MTs NTT, RTComm.RU and its subsidiaries and Westelcom, among others.

* OIBDA is not a value calculated according to U.S. GAAP or IFRS.  The Company calculates OIBDA as an operating income before amortization, depreciation of non-current assets and loss of profits from fixed asset retirement.  We believe that OIBDA provides important information to investors as it shows the Company's state of business including its ability to finance capital expenditures, acquisitions and other investments as well as a chance to attract borrowed funds and service a debt.