Moscow – November 9, 2009:  Rostelecom (NYSE: ROS; RTS, MICEX: RTKM, RTKMP), Russia’s national telecommunications operator, today announced its unaudited consolidated financial results for the first six months of 2009 in accordance with International Financial Reporting Standards (IFRS):

Highlights

- Consolidated revenue for the fist half  of 2009 increased by 4.4% year on year to RUB 32,8 billion;

- Revenue from data transmission and intelligent network services (INS), resulting from the Company’s business diversification initiatives, more than doubled year on year to RUB 4,7 billion and accounted for 14% of Rostelecom’s consolidated revenue;

- First half 2009 OIBDA*  decreased by 26.9% year on year to RUB 5,7 billion, representing an OIBDA margin of 17.5%;

- First half 2009 net profit amounted to RUB 1,4 billion representing a year-on-year decrease of 85.4%.

In the first half of 2009, Rostelecom and its subsidiaries (“the Company”) delivered financial and operating results as follows:

Revenue and Positioning in Major Markets

Rostelecom’s consolidated revenue for the first half of 2009 increased by 4.4% year on year amounting to RUB 32,774.0 million.

Revenue from data and intelligent network services more than doubled year on year and accounted for 14.2% of the Company’s consolidated revenue. Data transmission services as a standalone (mainly Internet access services for operators (“wholesale Internet”) and corporate clients as well as VPN services) saw a substantial threefold increase year on year to RUB 4,134.0 million, including the consolidation of RTComm.RU. Revenue from intelligent network services (INS) in the first half of 2009 amounted to RUB 522.0 million representing a year-on-year decrease of 20.1%.

Revenue from leased-line services in the accounting period decreased by 4.0% year on year to RUB 3,797.0 million – mainly due to the fact that Russian mobile and inter-regional operators are nearing completion in the construction of their own networks.

Overall, the Company’s first half 2009 revenue from new and value-added services, including data services, INS, leased lines and customer equipment services, among others, grew by 29.0% year on year to RUB 10,466.0 million, accounting for 32% of  the Company’s consolidated revenue. Traditional voice domestic and international long-distance (DLD/ILD) services accounted for the remaining 68% of the Company’s consolidated revenue, compared to 74% of the total in the first half of 2008.

In the traditional voice telecom segments there were several key trends that impacted Rostelecom during the first half of 2009.

Incoming ILD traffic terminated in Russia decreased by 3.5% year on year for the period while transit traffic from international operators saw a substantial increase of 66.4%. In total, incoming ILD traffic amounted to 1,728.1 million minutes representing a year-on-year increase of 12.0%. Revenue from international operators for incoming ILD telephone traffic transit and termination rose 21.7% year on year to RUB 3,364.0 million.

Domestic long-distance (DLD) traffic dropped by 5.0% year on year to 4,758.3 million minutes, while first half 2009 DLD revenues decreased by 9.8% to RUB 13,253.0 million.

Outgoing international long-distance (ILD) traffic decreased by 7.9% year on year totaling 862.7 million minutes. Revenue from ILD services to Russian end-customers and operators amounted to RUB 5,691.0 million, a decrease of 2.4% year on year.

The decrease in DLD and OILD traffic and revenue is primarily attributable to the global macroeconomic 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.

Operating Expenses, OIBDA, Operating profit

Total operating expenses for the first half of 2009 amounted to RUB 30,797.0 million, representing an increase of 13.4% year on year.  This was primarily attributable to the increase in payments to international operators and the consolidation of RTComm.RU.

Payments made to international operators increased by 38.7% year on year to RUB 4,966.0 million as a result of the Russian rouble devaluation and growth in international transit traffic. Payments to Russian operators rose by 4.3% to 12,496.0 million.  This increase was mainly due to the consolidation of RTComm.RU, as payments to Russian operators made by OJSC Rostelecom as a standalone decreased.

Staff costs for the first half of 2009 totaled RUB 5,405.0 million, representing an increase of 21.5% year on year. This was primarily a result of the consolidation of RTComm.RU’s results and an increase in the salary budget.  It should be noted that the Company’s salary inflation indexing policy dating back to April 2008 yielded higher salaries in the first quarter 2009 compared to the first quarter of 2008.

In line with the Company’s business optimization initiatives and the streamlining of the organizational structure, the overall headcount for OJSC Rostelecom and its subsidiaries was reduced by 1.6% year on year to 21,992 employees as of June 30, 2009. With respect to OJSC Rostelecom as a standalone, the reduction was 3.1%, with a headcount as of June 30, 2009 20,600 employees.

In the first half of 2009, OIBDA dropped by 26.9% year on year to RUB 5,735.0 million representing an OIBDA margin of 17.5%.

Depreciation charges for the first half of 2009 amounted to RUB 3,786.0 million – a year-on-year increase of 3.2%.

As a result of the growth in operating expenses, which exceeded the increase in revenue by 2.6 times (in rouble terms), the Company’s first half 2009 operating profit decreased by 53.3% year on year to RUB 1,977.0 million, with an operating margin of 6.0%.

Other Income/Loss

Other loss for the first half of 2009 amounted to RUB 50.0 million compared to other income of  RUB 9,030.0 million in the same period a year ago. This difference is attributable to the significant additional income realized following the sale of investments in the first half of 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.

Consolidation

First half 2009 consolidated financial statements include the results of operations of OJSC Rostelecom and its subsidiaries: GlobalTel, Globus-Telecom, Zebra Telecom, MTs NTT, RTComm.RU and its subsidiaries, Westelcom, among others.

Net profit

In the first half of 2009 Rostelecom’s consolidated net profit decreased by 85.4% and totaled

RUB 1,431.0 million. Net margin amounted to 4.4%.

Rostelecom will host its half year 2009 results conference call on November 9, 2009 beginning at 9.30 AM (Eastern US) / 2.30 PM (London) / 5.30 PM (Moscow).  A listen-only webcast of the call will be available both live, and for replay purposes, on the Investor Center page of Rostelecom’s website at www.rt.ru/en/icenter.

* 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.