Moscow – May 4, 2006 – Rostelecom (NYSE: ROS; RTS, MICEX: RTKM, RTKMP), Russia’s national long-distance telecommunications operator, today announced unaudited first quarter 2006 results in accordance with Russian accounting legislation (RAS).

First quarter 2006 revenues amounted to RUR 14,585.4 million - a year-on-year increase of 52.3%.  The increase is primarily attributable to higher DLD and outgoing ILD revenues as a result of the transition to the new system of interaction with Russian operators and subscribers for the provision of domestic and international long-distance services, which came into effect on January 1, 2006.

Domestic long-distance (DLD) traffic for the first three months 2006 amounted to 2,417.3 million minutes – a 4.1% increase year on year.  First quarter 2006 DLD revenues grew 77.8% and totaled RUR 7,858.1 million. 

Outgoing international long-distance (ILD) traffic rose 17.4% to 451.5 million minutes.  ILD revenues from Russian operators and subscribers increased by 45.2% over the first quarter 2005 and totaled RUR 3,198.8 million. 

First quarter 2006 incoming ILD traffic totaled 523.1 million minutes - a year-on-year increase of 26.1%. Rostelecom increased its share of incoming international traffic, underscoring the strength of the Company’s market position. Revenues from international operators for incoming ILD traffic transit and termination rose 4.9% year on year to RUR 1,014.2 million. 

Revenue from other business segments increased by 25.8% compared to Q1 2005 to RUR 2,514.3  million, reflecting the growth of new products and services.  Rostelecom delivered solid increases in revenues from leased lines, intelligent network services and customer equipment servicing.  For the first three months of 2006, revenues from leased line services grew 29,6% to RUR 1,733.0 compared to the same period last year.

Rostelecom’s operating expenses for the first quarter 2006 amounted to RUR 12,284.5 million.  The 92.3% increase compared to last year was driven mainly by higher payments to Russian operators which increased by a factor of 3.5 times mainly as a result of the new interaction system.

Depreciation increased 23.3% year on year to RUR 769.0 million for the first three months of 2006 as a result of significant additions of property, plant and equipment in 2005.

¹  All traffic data provided in the press release is preliminary.

²   EBITDA is calculated as total revenues less operating expense excluding depreciation.

As a result of higher operating costs, EBITDA for the first quarter 2006 totaled RUR 3,070.0 million down 19.5% year on year, representing an EBITDA margin of 21.0%.

Operating profit amounted to RUR 2,300.9 million, down 27.9% compared to last year.

The result from other operating activities for the first three months 2006 totaled RUR 332.2 million compared to RUR 151.5 million a year ago. The increase is mainly driven by a revaluation of the Company’s financial investments. Rostelecom recorded a RUR 368.1 million net revaluation gain for the first quarter 2006 compared to RUR (58.9) million net revaluation loss a year ago. First quarter 2006 net interest income increased by 19.9% over the same period last year, totaling RUR 163.9 million. 

The result from other non-revenue activities for the first quarter 2006 amounted to RUR 61.6 million compared to RUR (153.3) million a year ago.

Rostelecom’s net profit for the first quarter 2006 totaled RUR 2,055.4 million compared to RUR 2,411.4 million a year ago.