Moscow, Russia – April 2, 2012 – Rostelecom OJSC (MICEX - RTS: RTKM, RTKMP; OTCQX: ROSYY) (“the Company”), Russia’s national telecommunications operator, announces that it has started the second stage of the Company’s reorganisation, following the signing of Decree ¹340 on the reorganisation of OJSC Rostelecom[1]by the President of Russia on March 24, 2012.

The Decree states that a unified company will be created by merging Svyazinvest OJSC (“Svyazinvest”) and its total assets[2]with Rostelecom. The Russian Federation’s stake in Rostelecom will amount to over 50% of ordinary shares when coupled with a stake belonging to the State Corporation Bank for Development and Foreign Economic Affairs (“Vnesheconombank”). At the same time, the Decree excludes Svyazinvest from the list of strategic joint stock companies[3].

As a result of the reorganisation, the existing cross ownership between Svyazinvest and Rostelecom[4]is expected to be eliminated and any treasury stock that is created as a result of the merger is likely to be cancelled (Rostelecom shares currently owned by Svyazinvest). Prior to the merger of Svyazinvest with Rostelecom, which is subject to receiving all the necessary corporate approvals and independent valuations, the following major steps will be taken as part of the reorganisation plan:

Svyazinvest is expected to issue additional ordinary shares, which will be acquired by the State by exchanging stakes in a number of telecom assets[5]. Rostelecom will acquire the additional Svyazinvest ordinary shares for cash;

Svyazinvest is expected to purchase up to 0.4% of Rostelecom shares from Mobitel LLC (“Mobitel”), a subsidiary of Rostelecom[6];

Mobitel is expected to acquire a 50% stake in Sky Link CJSC (“Sky Link”)[7]from Svyazinvest in exchange for Rostelecom ordinary shares, owned by Mobitel.

As part of the second stage of the reorganisation, Rostelecom and Svyazinvest will hold an extraordinary general meeting for each set of shareholders, notifications will be sent to their respective creditors, and the mandatory buyback of shares from shareholders that vote against the reorganisation, or do not participate in voting, will be executed for an amount not exceeding 10% of each company’s net asset value.

Rostelecom will then issue additional shares, to replace Rosimushchestvo’s stake in Svyazinvest, and Svyazinvest shares will be converted into Rostelecom shares. The current Svyazinvest stake in Rostelecom is expected to be cancelled. Current laws stipulate that the proposed reorganisation must be approved by 75% of ordinary and preferred shares shareholders present at each company’s respective extraordinary general meetings.

Alexander Provotorov, President of Rostelecom: “The Decree’s signing and the beginning of the second stage of the reorganisation is a very important and long-awaited development for us. A great deal was achieved during the first stage of the reorganisation, including the mergers of large operational interregional telecom companies, the launches of key integration projects and the successful launch of a single Rostelecom share which increased our trading liquidity. We are now ready to take Rostelecom to the next stage of its development, one that will enhance Rostelecom’s investment case by simplifying its shareholder structure and eliminate the cross ownership of Rostelecom.”

Rostelecom will hold a conference call with Alexander Provotorov, President of Rostelecom, to discuss the second stage of the reorganisation at 16:00 (Moscow)/ 13:00 (UK) on April 2, 2012.

To participate in the conference call, please dial:

UK/ International:       + 44 20 7190 1595
US:                             +1 480 629 9645

A replay of the conference call will be available on the Company’s website https://www.old.rt.ru/en/reorganization/news/ in due course.  

[1]www.pravo.gov.ru:8080/page.aspx?12391

[1]JSC Central Telegraph, JSC GiproSvyaz, JSC KGTS, as well as assets that are recorded in the charter capital of Svyazinvest, in accordance with Russian Federation Presidential Decree ¹1005 dated August 12, 2010 and ¹1418 dated November 15, 2010

[1]In accordance with Russian Federation Presidential Decree ¹1009 dated August 4, 2004, with amendments

[1]Rostelecom owns 25% + 1 share of Svyazinvest ordinary shares. Svyazinvest owns 43.374% of Rostelecom ordinary shares

[1]Assets that are recorded in the charter capital of Svyazinvest in accordance with Russian Federation Presidential Decrees ¹1005 dated August 12, 2010 and ¹1418 dated November 15, 2010

[1]Rostelecom owns a 99.9% stake in Mobitel

[1]100% effectively as Sky Link’s wholly-owned subsidiary owns the remaining 50% stake of Sky Link shares