Moscow – December 13, 2010  – Rostelecom OJSC (“the Company”) (RTS, MICEX: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announced its unaudited consolidated IFRS financial results for the third quarter and first nine months ended September 30, 2010.

Third quarter financial highlights

· Consolidated revenues of RUB 15.8 billion

· Revenues from new and value-added services up 16% year on year to RUB 5.8 billion, and accounted for 37% of the Company’s consolidated revenues compared to 32% for the corresponding period in 2009;

· Adjusted OIBDA of RUB 3.2 billion (excluding RUB 461.0 million of non-cash accrual of stock based compensation for employees) with an adjusted OIBDA margin of 20.3%;

· Adjusted net income of RUB 1.4 billion;

· Capital expenditure of RUB 2.8 billion – representing 17.5% of consolidated revenues.

Nine months financial highlights

· Consolidated revenues of RUB 45.8 billion

· Revenues from new and value-added services up 10% year on year to RUB 16.5 billion, and accounted for 36% of the Company’s consolidated revenues compared to 31% for the corresponding period in 2009;

· Adjusted OIBDA of RUB 9.0 billion (excluding RUB 461.0 million of non-cash accrual of stock based compensation for employees) with an increased adjusted OIBDA margin of 19.7%;

· Adjusted net income of RUB 3.3 billion;

· Capital expenditure of RUB 7.7 billion – representing 16.9% of consolidated revenues.

Key strategic developments

· Rostelecom acquired the 25%+1 share stake in the charter capital of Telecommunication Investment Joint Stock Company (“Svyazinvest”) from Comstar-UTS for RUB 26.0 billion. RUB 23.0 billion of the credit lines were opened by Sberbank at a weighted average interest rate of 7.89%, while RUB 3.0 billion came from the Company’s own funds.%, while RUB 3.0 billion came from the Company’s own funds.

· An Extraordinary General Meeting of Shareholders (“EGM”), held on November 10, 2010, approved the interim dividend payment for the first nine months of 2010:  RUB 1.67 per class “A” preferred share; RUB 1.11 per ordinary share

· The EGM did not approve the proposed amendments to the Company’s Charter, related to the allocation of 10% of Rostelecom’s net income for the full year as dividend payment on outstanding class “A” preferred shares. Rostelecom’s management team and the Board of Directors will work together on the necessary amendments to the Charter, in order to ensure an appropriate balance between interests of the holders of the different types of Rostelecom’s securities.

Rostelecom generated RUB 15.8 billion of revenues for the third quarter of 2010, compared to RUB 16.0 billion for the corresponding period of 2009. The performance reflected:

· Accelerating revenue growth from new and value-added services (including data services, INS, leased lines and customer equipment services);

· Gradual decrease in revenues from traditional voice domestic and international long-distance (DLD/ILD) services.

Revenue from new and value-added services grew by 16% year on year to
RUB 5.8 billion in the third quarter of 2010, and accounted for 37% of the Company’s consolidated revenues, compared to 32% for the corresponding period in 2009. The increase reflected the mixed effect of:

· 40% year on year increase in revenues from data transmission services (including Internet access services for operators (“wholesale Internet”) and corporate clients, as well as VPN services) to RUB 3.3 billion;

· 3% year on year increase in revenues from intelligent network services (INS) to RUB 1.2 billion;

· 11% year on year decrease in revenues from leased line services to RUB 1.4 billion, primarily due to the construction of networks by other telecom operators.

Revenues from traditional voice domestic and international long-distance (DLD/ILD) services declined by 9% year on year to RUB 10.0 billion and accounted for 63% of the Company’s consolidated revenue in the third quarter of 2010, compared to 68% in the corresponding period of 2009. The decrease in revenues from traditional services was mainly driven by the decrease in DLD and OILD traffic. The decline primarily reflected 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.

Rostelecom’s revenues for the year to date declined by 6% year on year to RUB 45.8 billion.

Operating expenses before depreciation, impairment of property, plant and equipment (PP&E) and gain on disposal of PP&E and the RUB 461.0 million non-cash accrual of stock based compensation for employees for the third quarter of 2010, increased by 3% year on year to RUB 12.6 billion, primarily due to the increase in administrative and other expenses related to the ongoing reorganization. The Company’s total operating expenses for the third quarter of 2010 were up 7% year on year to RUB 15.0 billion.

Operating expenses before depreciation, impairment of property, plant and equipment (PP&E) and gain on disposal of PP&E and RUB 461.0 million of non-cash accrual of stock based compensation for employees for the year to date decreased by 6% year on year to RUB 36.8 billion. Total operating expenses for the year to date were down 4% year on year to RUB 42.8 billion.

Adjusted OIBDA in the third quarter of 2010 decreased by 15% year on year to RUB 3.2 billion in the third quarter of 2010 with OIBDA margin of 20.3%, compared to 23.5% in the corresponding period of 2009. Adjusted OIBDA was down 5% year on year to RUB 9.0 billion for the year to date a higher adjusted OIBDA margin of 9.7% compared to 19.5% in the same period of 2009.

Depreciation increased by 8% year on year to RUB 1.9 billion in the third quarter of 2010 and by 2% year on year to RUB 5.7 billion for the year to date. This reflected a 24% year on year increase in capital expenditures to RUB 2.8 billion in the third quarter of 2010 and 87% year on year increase to RUB 7.7 billion for the year to date.

Adjusted operating income decreased by 37% year on year to RUB 1.2 billion in the third quarter of 2010, with an adjusted operating margin of 7.8% and by 13% year on year to RUB 3.4 billion for the year to date, with an adjusted operating margin of 7.5%

Other income increased by 25% year on year to RUB 394 million in the third quarter of 2010 and doubled year on year to RUB 723.0 million for the year to date primarily due to the decrease in foreign exchange losses.

Rostelecom’s adjusted net income declined by 25% to RUB 1.4 billion in the third quarter and represented 8.7% of consolidated revenues. Adjusted net income remained stable year on year at RUB 3.3 billion for the year to date and accounted for7.1% of consolidated revenues. The EGM on November 10, 2010, voted to approve the dividend payment of RUB 1.2 billion for the period 1 January to 30 September 2010, with 10% of net income under Russian Accounting Standards to be paid to preferred shareholders and 20% to be paid to ordinary shareholders.