- Revenue for the first nine months of 2009 amounted to RUB 45,405.8 million – a year on year decrease of 2.2%;

- OIBDA*  decreased by 22.4% year on year to RUB 9,359.6 million, representing an OIBDA margin of 20.6%; 

- Net profit totaled RUB 4,553.6 million representing a year on year decrease of 34.3%;

- Revenues from data transmission and telematic services almost doubled year on year to RUB 3,757.8 million.

Moscow – November 2, 2009 – Rostelecom (NYSE: ROS; RTS, MICEX: RTKM, RTKMP) (“Rostelecom” or the “Company”), Russia’s national telecommunications operator today announced its unaudited first nine months 2009 results in accordance with the Russian Accounting Standards (RAS).

Rostelecom’s revenue for the first nine months of 2009 totaled RUB 45,405.8 million representing a decrease of 2.2% year on year, which is mainly due to a reduction in revenues from a number of traditional segments. However, through the continued diversification of its business, the Company substantially increased the revenue from data services. During the reporting period under review, the share of new services (data and intelligent network services) amounted to 10.0% of Rostelecom’s total revenue.

Domestic long-distance (DLD) traffic for the reporting period decreased 7.5% year on year to 6,957.9 million minutes** . DLD & interconnection revenues for the reporting period totaled RUB 19,447.4 million, representing a year on year decrease of 11.4%.

Outgoing international long-distance (OILD) traffic saw a decrease of 14.1% year on year to 1,297.3 million minutes. ILD revenues from Russian operators and end-customers amounted to RUB 8,614.0 million, a decrease of 4.9% compared to the first nine months of 2008.

The decrease in DLD and OILD traffic and revenue is primarily attributable to the global macro-economic environment, the growing competition in the long-distance market as well as the continued migration of long-distance end-customer traffic from fixed-line to mobile networks. In addition, in order to provide clients (end-customers /residential & corporate/ and Russian operators) with competitive tariffs the Company follows a flexible pricing policy which also impacted the DLD and outgoing ILD revenues.

During the period under review, incoming ILD traffic terminated in Russia decreased by 1.4% year on year while transit traffic from international operators saw an increase of 40.7%. In total, incoming ILD traffic amounted to 2,635.0 million minutes representing a year on year increase of 9.4%. Revenues from international operators for incoming ILD traffic transit and termination rose 10.5% year on year to RUB 4,925.3 million.

Revenue for the reporting period from other business segments grew by 11.5% year on year to RUB 12,419.1 million. The Company delivered a 1.5 fold increase year on year in revenues from new services, including data and intelligent network, to RUB 4,529.2 million. Revenues from data transmission and telematic services increased by 86.1% year on year and totaled RUB 3,757.8 million.

Revenues from leased-line services decreased by 6.3% year on year to RUB 5,518.3 million. This decrease is mainly attributable to the fact that Russian operators (mobile and inter-regional) are nearing completion in constructing their own networks, thus reducing their demand in channels. In addition, this presented the operators with the opportunity to provide channels for rent thus resulting in increased competition in the Russian leased line market.

Rostelecom’s operating expenses for the reporting period amounted to RUB 39,390.2 million representing a year on year increase of 4.9%. Among other factors, this increase was mainly due to the higher payments made to international operators as a result of the Russian Rouble devaluation and growth in international transit traffic. Additionally, there was also an increase in payments to regional operators for rented channels (last miles) on the back of increased  sales of Internet and VPN services.

Depreciation for the period under review, amounted to RUB 3,344.0 million. The 4.0% increase compared to the same period last year is a result of property, plant and equipment additions during 2008.

Operating Income before Depreciation and Amortization (OIBDA) amounted to RUB 9,359.6 million which is a year on year decrease of 22.4%. OIBDA margin amounted to 20.6% compared to 26.0% in the corresponding period last year.

First nine months 2009 operating profit decreased by 32.0% year on year to RUB 6,015.6 million.

Other gains and losses for the first nine months of 2009 totaled a net loss of RUB 300.0 million compared to a net gain of RUB 412.1 million a year ago. There are a number of factors that this loss is attributable to, firstly, provision for allowances contrary to their recovery in the period of first three quarters of 2008 as well as the loss from the sale of investments compared to a RUB 445 million net gain (including the sale of Golden Telecom’s shares) in the corresponding period of 2008. Additionally, the foreign exchange loss in the accounting period also impacted the overall results.

As a result, Rostelecom’s first nine months 2009 net profit amounted to RUB 4,553.6 million, down 34.3% year on year.

*OIBDA is calculated as total revenues less operating expenses excluding depreciation.

**All traffic data provided in the press release is preliminary. In addition, this press release contains verified DLD traffic data for the first nine months of 2008 – as disclosed in the Rostelecom FY 2008 IFRS results release.