PUBLIC JOINT-STOCK COMPANY ROSTELECOM

Annual Report • Mar 4, 2022

National Storage Mechanism | Additional information

ROSTELECOM PJSC (RKMD)

ROSTELECOM PJSC: ROSTELECOM FINANCIAL AND OPERATING RESULTS 4Q AND FY 2021

04-March-2022 / 09:40 MSK

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.

The issuer is solely responsible for the content of this announcement.

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Revenue increased by 6% in 2021; OIBDA[1] up 13%; FCF[2] up by 43%.

Moscow, Russia - March 4, 2022 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), Russia's largest integrated digital company, today announces its consolidated financial results for the fourth quarter and the full year of 2021 prepared in accordance with IFRS.

FOURTH QUARTER 2021 KEY FINANCIAL HIGHLIGHTS

• Revenue grew by 3% to RUB 168.3 billion compared to 4Q 2020:

• OIBDA up by 10% to RUB 49.1 billion;

• OIBDA margin up by 1.9 p.p. to 29.2%;
• Net profit of RUB 0.5 billion compared to net loss of RUB (1.5) billion in 4Q 2020;
• CAPEX[3] excluding state programmes increased by 18% to RUB 42.5 billion (25.3% of revenue) compared to 4Q 2020;
• FCF of RUB 15.9 billion compared RUB 19.6 billion in 4Q 2020;

FULL YEAR 2021 FINANCIAL HIGHLIGHTS

• Revenue increased by 6% to RUB 580.1 billion;

• OIBDA grew by 13% to RUB 218.8 billion;

• OIBDA margin improved by 2.2 p.p to 37.7%;
• Net profit increased by 26% to RUB 31.8 billion;
• CAPEX excluding state programs increased by 11% to RUB 118.7 billion (20.5% of revenue);
• FCF increased by 43% to RUB 32.5 billion;
• Net Debt[4] including lease liabilities increased by 8% since the beginning of the year to RUB 505.2 billion, resulting in a Net Debt/OIBDA ratio of 2.3x.

Key figures for 4Q 2021, RUB mln

RUB million	4Q 2021	4Q 2020	change, y-o-y
Revenue	168,332	163,009	3%
OIBDA	49,116	44,491	10%
OIBDA margin %	29.2%	27.3%	-
Operating Income	8,009	7,295	10%
Operating margin %	4.8%	4.5%	-
Net Income	0.450	(1,507)	-
% of revenue	0.3%	(0.9%)	-
Capital Expenditure excl. state programs	42,548	36,162	18%
% of revenue	25.3%	22.2%	-
Net debt	505,197	466,035	8%
Net debt/ annualised OIBDA	2.3	2.4	-
FCF	15,938	19,644	(3,706)

Key figures for FY 2021, RUB mln

RUB million	2021	2020	change, y-o-y
Revenue	580,092	546,889	6%
OIBDA	218,814	194,050	13%
OIBDA margin %	37.7%	35.5%	-
Operating Income	73,707	68,965	7%
Operating margin %	12.7%	12.6%	-
Net Income	31,832	25,363	26%
% of revenue	5.5%	4.6%	-
Capital Expenditure excl. state programs	118,740	107,139	11%
% of revenue	20.5%	19.6%	-
Net debt	505,197	466,035	8%
Net debt/ annualised OIBDA	2.3	2.4	-
FCF	32,499	22,659	9,840

Mikhail Oseevskiy, President of Rostelecom, commented: "A number of strategic and structural changes have made it possible for Rostelecom to achieve its financial and operational targets set for 2021. We have successfully expanded and improved our product line, with an increased share of innovative digital services in the range as well as grown size of the business, while strengthening its market position in key segments. As a result, we managed to post positive performance across all key financial indicators. Solid growth was also demonstrated by FCF - over 40%. Strong 2021 results provide the basis for an increase in shareholder payouts relative to the lower limit set by the dividend policy. Therefore, management considers it possible to recommend to increase dividend payments to 6 rubles per share for 2021."

Sergey Anokhin, Senior Vice-President and Chief Financial Officer added: "In 2021, Rostelecom continued to show stable business growth and a high level of cost control, which together ensured decent financial results. We also managed to meet our guidance in terms of revenue and OIBDA growth for 2021, while substantial cash flow has enabled us to implement some of the planned investment projects ahead of schedule while keeping the targeted range of CAPEX/Sales ratio. We enhanced our operations both in mature core and new growing areas coupled with increased internal efficiency as well as streamlined and downsized business model. We also aimed at decreasing our OPEX and optimizing the company's debt structure to improve its cost and ensure resilience over the market volatility. On the financial front, these efforts have led to marginality growth, solid FCF generation as well as debt burden reduction. Operationally, they have enabled the company to further sustain and invest into growing promising areas. At the same time, the complex nature of the geopolitical context and uncertainty of the macroeconomic risks which can have a negative impact on the dynamics of the results of subsequent periods, we will take some time before discussing the potential prospects for 2022 until we see stabilisation and certainty and lower volatility in the financial markets."

KEY OPERATING HIGHLIGHTS

Fixed services business

Number of subscribers (million):	4Q 2021	4Q 2020	change, y-o-y
FIBRE-BASED SERVICES Internet access	10.8	10.4	4%
B2C: Broadband	9.8	9.5	4%
B2B/G: Broadband	0.7	0.6	10%
B2B/G: Broadband + VPN	1.0	0.9	10%
IPTV	6.4	6.1	5%
Hosted PBX	0.218	0.160	37%
TRADITIONAL SERVICES
Local telephony services	12.5	14.0	(11%)
B2C	9.9	11.3	(12%)
B2B/G	2.6	2.7	(6%)
Broadband xDSL
B2C: Broadband xDSL	2.5	3.0	(15%)
B2B/G: Broadband xDSL	0.2	0.2	(17%)
Cable TV	4.5	4.7	(6%)

ARPU[5] (RUB):	4Q 2021	4Q 2020	change, y-o-y
FIBRE-BASED SERVICES Internet access	380	377	1%
B2C: Broadband	2,868	2,764	4%
B2B/G: Broadband	4,066	4,298	(5%)
B2B/G: Broadband + VPN	306	307	(0,3%)
IPTV	907	1,108	(18%)
Hosted PBX
TRADITIONAL SERVICES
Local telephony services	223	227	(2%)
B2C	575	585	(2%)
B2B/G
Broadband xDSL	462	450	3%
B2C: Broadband xDSL	1,527	1,324	15%
B2B/G: Broadband xDSL	191	186	3%
Cable TV	380	377	1%

Mobile business

	4Q 2021	4Q 2020	change, y-o-y
Data Traffic, incl. MVNO,Pb	1,856	1,442	29%
Churn, %	(8.05%)	(8.09%)	0.04 p. p.
Growth of active Internet users, %	17.6%	20.0%	(2.4 p. p.)
Subscriber base, mln	47.5	46.6	2%

1. The total number of fibre optic broadband internet subscribers among households grew by 4% to 9.8 million in the fourth quarter of 2021 compared to the corresponding period of 2020; ARPU grew by 1% to RUB 380.
2. The total number of fibre optic broadband internet and VPN subscribers in B2B and B2G increased by 10% year-on-year to 0.7 million; ARPU was up by 3% to RUB 2,868.
3. The number of IPTV users grew by 5% to 6.4 million users compared to the corresponding period of last year, with average ARPU of RUB 306;
4. The number of active mobile Internet users grew in 4Q 2021 by 17.6% compared to the corresponding period of 2020. The mobile Internet data traffic growth reached 29%; at the same time, cellular customer base churn was 8.05%.The mobile subscriber base grew by 2% to 47.5 million users in 2021.

KEY EVENTS RELATING TO 2021 AND AFTER THE END OF THE REPORTING PERIOD

Business news

• Rostelecom continues to develop and expand its range of products and services:

• Wink:

  • New services:
    • "Film Swap" for free exchange of a purchased movie within the first 20 minutes of watching;
    • Mobile data exchange for movie minutes;
  • New subscription offers and packages "Transformer", "Maximum", "Premium", Wink+more.tv;
  • Partnership-based integration of Wink and VK Combo;
  • Seamless migration of all IPTV subscribers to Wink.

Wink was among top three leaders for the number of paying OTT subscribers posting a five-fold growth of the subscriber base[6]; the total number of active Wink users surpassed three million in FY 2021;

• As part of the gaming product line expansion, with the Gaming tariff as a core service:
  • New gaming option launched to provide clients with a second account and share benefits with friends;
• Expanded functionality and added options within Rostelecom.Key:
  • Video analytics and traffic control functions for special vehicles;
  • Wider range of compatible equipment and an integrated intercom panel Sputnik;
  • Omnichat options added to the mobile app for technical support and expanded functionality;

Rostelecom.Key currently covers over 242,000 apartments, while the number of video cameras connected to the 'Key' platform has exceeded 10,000.

• As part of Smart Home solutions:
  • Face Detection service introduced with an option to programme the recording;
  • Further improvements to adhoc options, allowing for cloud recording only if an activity is recorded;

Three-fold growth of revenues from services compared to 2021.

• Further improvements of the B2B product offering:

  • New services:
    • Wi-Fi 2.0 platform for B2B with an extended functionality for analysis of public Wi-Fi network users' activity;
    • Smart Office cloud service for remote control and administration of service facilities from anywhere in the world provided there is Internet access;
    • Transport monitoring service for assessing the fleet quality and state;
    • Ad designer service allowing clients to publicise content and control TV-sets remotely within the TV for corporates product;
    • Data Science powered personified solutions for SMEs;
    • Digital Contract Signing solution for SMEs;
    • Additional options for Hosted PBX, including voice analytics, voice-activated digital assistants, integration with mobile numbers and automatic analysis of calls;

• Rostelecom continues to grow its digital segment:

• As part of cloud and data center services:

  • All Rostelecom data centers are now PCI DSS[7] compliant;
  • Technical compatibility of the software for TIONIX VDI remote and virtual workstations and the Russian processors Baikal-T and Baikal-M;
  • New platform 'Public cloud platform' launched in a Moscow data center (Kurchatovsky);
  • Newly launched:
    • Second queue of the Udomlya data center for 800 racks;
    • New Novosibirsk data center for 304 racks;
    • New Tier III accredited data center for 207 racks launched in Moscow;
  • New facility acquired in the south of Moscow for the construction of four more data centers with a total rack capacity of 7,000.
  • CloudLine services launched in the Novosibirsk data centers;
  • Rostelecom ranked first in the rating of largest Russian data center operators based on CNews Analytics;

• As part of cybersecurity services:

  • News services launched:
    • Solar advisor - employee efficiency monitoring system;
    • Solar Mss Sandbox service for protection against advanced cyber-attacks;
    • Cryptographic protection for the communication channels of Virtual Data Center users;
  • Projects realised:
    • Integration of a DLP-system Solar Dozor for Unipro, Zenith football club, Rosatom, National Bank of Kazakhstan;
    • Monitoring and emergency response within the infrastructures of Rosseti Ural and GLONASS;
    • Seven large contracts signed for the launch of Solar appScreener in the APAC region, including state bodies and Singapore airlines;
    • Adversary Emulation trainings for sector red teams under Ministry of Energy and cross-sector trainings for TMK and the Sinara group;
  • Center of expertise for cybersecurity services Solar MSS opened in Samara;
  • Solar JSOC was transformed into a center for cyber-attacks response;
  • The Moscow Institute of Engineering Physics test and certification center has chosen Solar appScreener for analysis of its software for compliance with the information security certification requirements of the Federal Service for Technical and Export Control of Russia;
  • Pilot launch of the Cyber Polygon training project;

• Operator business segment highlights:

• O2O[8] project:

  • revenues grew by 14% in FY 2021;
  • Fibre-optic line servicing expanded to 192.4 km (+6.1% compared with FY 2020);
  • Base stations servicing expanded to 103,500 units (+45% compared with FY 2020);
• As part of international partners engagement:
  • Two 100 GBs channels provided to China Telecom for a long-term lease;
  • IP-transit for the Kyrgyzstani telecom leader Alfa Telecom (TM Megacom);

• As part of Russian partners engagement:

  • Long-term contract signed with Megafon for a new service "Provision of an optic fibre segment".
  • Fibre opitics lease agreement signed with ER Telecom Holding for 17 segments of the transmission network.
  • Vladivostok-Tokyo channel with 10GBs in speed set up for VimpelCom;

• As part of large projects and contracts:

  • Contract signed with Russian Post for provision of communications services for the country's largest corporate data network;
  • Rostelecom supplied Hosted PBX for over 1,800 offices of the Federal Treasury;
  • Rostelecom and Danone signed an agreement for supply and installation of TV-sets and other equipment to monitor health and wellbeing of visitors and employees;
  • Rostelecom supplied infrastructure for automated workspaces for Rskhb-Intekh;
  • Rostelecom has signed a contract for provision of cloud access to Carsharing Russia (Delimobil).

• Mobile business with Tele2 at its core continues to progress:

• New solutions for clients:

  • Option to exchange mobile minutes for movies, coffee and Xiaomi smartphones;
  • Option to save up minutes of gigabytes with no expiry date;
  • Family and friends discounts;
  • Option to use Telegram and Viber messengers, as well as smart parking assistant with zero balance on the account;
  • Register sim-cards remotely using unqualified electronic signature function in the GosKey app;
  • Option to purchase sim-cards on Yandex.Lavka, Yandex.Market and AliExpress;

Other news

• Rostelecom presented its 2025 Strategy and the 2021-2023 Dividend Policy following the approval by the Board of Directors;
• Rostelecom's Board of Directors has extended Michael Ossevsky's tenure as company president until 2027;
• Acquisition of BFT Group, the leading digitisation provider for state management
• Acquisition of TBE-Telecom, a provider of MVNE platform;
• Consolidation of 100% of Rostelecom Digital Technologies;
• Rostelecom achieved Resg1 rating by AK&M for its ESG reporting and disclosure;
• Rostelecom tops the ESG rating by the National Rating Agency;
• Rostelecom has been included in the Bloomberg Gender-Equality Index for the third consecutive year;
• The company was named the best employer in the telecom sector, while Tele2 Russia assumed leadership among mobile operators based on hh.ru rating, and has received two gold and three silver awards at the Global Top Ranking Performers Awards;
• Wink has won two awards for best OTT-service at Golden Ray and the Big Digit National awards.

OPERATING REVIEW

Revenue analysis

Revenue structure by services

RUB million	4Q 2021	4Q 2020	change	2021	2020	change
Mobile	50,734	47,275	7%	194,345	176,958	10%
Broadband	27,256	23,625	15%	99,947	90,377	11%
Digital	37,942	30,442	25%	88,399	77,298	14%
TV services	10,172	9,792	4%	39,913	38,004	5%
Wholesale services	17,396	20,116	(14%)	74,075	74,762	(1%)
Interconnect and traffic transit services	4,313	4,593	(6%)	17,760	17,803	0%
VPN	5,986	8,216	(27%)	29,729	29,722	0%
Rent of channels	2,348	2,575	(9%)	9,707	10,095	(4%)
Rent and maintenance of telecommunications infrastructure	4,749	4,732	0,4%	16,879	17,142	(2%)
Fixed telephony	11,831	13,356	(11%)	48,862	54,620	(11%)
Other services	13,001	18,403	(29%)	34,551	34,870	(1%)
Total	168,332	163,009	3%	580,092	546,889	6%

Revenue structure by segments and clusters

RUB million	4Q 2021	4Q 2020	change	2021	2020	change
1. Segments	90,449	93,602	(3%)	333,277	323 187	3%
B2C[9]	34,717	35,134	(1%)	138,430	138,290	0.1%
B2B/G[10]	39,853	43,044	(7%)	136,360	130,185	5%
B2O[11]	15,879	15,424	3%	58,487	54,712	7%
2. Digital Clusters	41,481	35,024	18%	89,569	75,656	18%
Data centers and cloud	12,512	11,678	7%	35,276	29,981	18%
Digital Region	10,255	9,604	7%	23,568	22,082	7%
Cyber Security	4,818	4,054	19%	8,856	6,024	47%
Others	13,896	9,688	43%	21,869	17,569	24%
3. Mobile	53,813	49,673	8%	205,283	185,765	11%
4. Other	3,969	4,046	(2%)	14,917	17,380	(14%)
Eliminations and corrections	(21,379)	(19,335)	-	(62,954)	(55,099)	-
Total	168,332	163,009	3%	580,092	546,889	6%

In the fourth quarter of 2021, revenue increased by 3% to RUB 168.3 billion, compared to the fourth quarter of 2020, as a result of the following factors:

• a 25% increase in revenue from digital services, mainly due to the growth of public platform solutions, video surveillance, and the promotion of data centre services;
• a 15% increase in revenue from broadband reflecting the proceeds from Internet connection contracts, growth of client base in fibre optic tariff plans and ARPU;
• a 7% increase in mobile business, driven by an increase in mobile Internet use and basic voice services.

Core contribution to revenue in the fourth quarter of 2021 came from Digital clusters, Mobile business as well as connectivity services, predominantly in B2B/G segment

During the twelve months of 2021, revenue increased by 6% to RUB 580.1 billion, year-on-year, as a result of the following factors:

• a 10% increase in mobile business, driven by an increase in mobile Internet use and basic voice services;
• a 14% increase in revenue from digital services, mainly due to the growth of public platform solutions, video surveillance, and the promotion of data centre services and cloud;
• a 11% increase in revenue from broadband reflecting the proceeds from Internet connection contracts, growth of client base in fibre optic tariff plans and ARPU.

Core contribution to revenue in the FY 2021 came from Mobile, Digital clusters (including Public Services and InfoSec), as well as B2B/G.

Operating income analysis

Operating expenses structure 

RUB million		4Q 2021		4Q 2020		change	2021		2020		change
Personnel costs		(39,361)		(40,303)		(2%)	(137,209)		(136,389)		1%
Depreciation, Amortization and impairment losses		(39,428)		(35,245)		12%	(140,059)		(119,702)		17%
Interconnection charges		(25,114)		(26,482)		(5%)	(96,816)		(95,635)		1%
Materials, repairs and maintenance, utilities		(13,001)		(12,382)		5%	(43,426)		(40,302)		8%
Gain on the disposal of PPE and intangible assets		1,674		2,151		(22%)	9,051		5,992		51%
Impairment loss of financial assets measured at amortized cost		(123)		(4,030)		(97%)	(1,911)		(7,165)		(73%)
Other operating income		4,922		6,603		(25%)	20,736		21,883		(5%)
Other operating expenses		(49,892)		(46,026)		8%	(116,751)		(106,606)		10%
Total operating expenses		(160,323)		(155,714)		3%	(506,385)		(477,924)		6%

In the fourth quarter of 2021, operating expenses increased by 3% compared to the corresponding period of 2020 and amounted to RUB 160.3 billion, largely due to the following factors:

• a 12% increase (of RUB 4.2 bln) in depreciation, amortization and impairment losses, due to shorter useful life for a number of core objects financial assets and intangible assets;
• an 8% increase (of RUB 3.9 bln) in other operating expenses, partially due to the formation of additional reserves, as well as promotion and marketing expenses;
• a 25% decrease (of RUB 1.7 bln) in other operating income, mainly due to a rescheduled payment plan for the proceeds from the Bridging the Digital Divide project for future periods;
• a 97% decrease (of RUB 3.9 bln) in impairment losses of financial assets measured at amortized cost, partially due to recovery of reserves for certain assets.

In the twelve months of 2021, operating expenses increased by 6% compared to the corresponding period of 2020 and amounted to RUB 506.4 billion due to the following factors:

• a 17% increase (of RUB 20.4 bln) in depreciation, amortization and impairment losses, due to an increase in depreciation charges for new items of fixed assets, intangible assets and leases;
• a 10% increase (of RUB 10.1 bln) in other operating expenses, partially due to the formation of additional reserves, as well as promotion and marketing expenses;
• an 8% increase (of RUB 3.1 bln) in materials, repairs and maintenance and utilities, partly due to an increase in utility bills;
• a 73% decrease (of RUB 5.3 bln) in impairment losses of financial assets measured at amortized cost, partially due to recovery of reserves for certain assets;
• a 51% increase (of RUB 3.1 billion) in gain on the disposal of PPE and intangible assets, mainly due to improved performance in real estate portfolio management.

OIBDA structure by segments and clusters

RUB million	4Q 2021	4Q 2020	change	2021	2020	change
1. Segments	24,430	21 027	16%	110,952	97,515	14%
B2C	6,306	6,525	(3%)	36,734	33,556	9%
B2B/G	13,479	10,486	29%	57,231	49,522	16%
B2O	4,645	4,015	16%	16,987	14,437	18%
2. Digital Clusters	12,700	9,013	41%	25,438	20,586	24%
Data centers and cloud	5,236	3,980	32%	15,245	12,450	22%
Digital Region	1,919	1,196	60%	5,094	4,415	15%
Cyber Security	2,204	1,852	19%	3,216	1,752	84%
Others	3,341	1,985	68%	1,883	1,970	(4%)
3. Mobile	21,806	17,878	22%	88,082	75,051	17%
4. Other	(6,469)	593	-	1,699	6,024	(72%)
Eliminations and corrections	(3,351)	(4,020)		(7,357)	(5,126)
Total	49,116	44,491	10%	218,814	194,050	13%

Operating profit increased by 10% in 4Q 2021 to RUB 8.0 billion and increased by 7% to RUB 73.7 billion in FY 2021 year-on-year.

OIBDA for 4Q 2021 increased by 10% to RUB 49.1 billion and by 13% to RUB 218.8 billion in FY 2021 year-on-year. OIBDA dynamics were influenced by revenue growth, and the above-mentioned changes in operating expenses. The OIBDA margin in 4Q 2021 increased by 1.9 p.p. to 29.2% compared to the 4Q 2020. OIBDA margin in FY 2021 increased by 2.2 pp to 37.7% compared to FY 2020. Higher OIBDA in FY 2021 was mainly influenced by higher revenues in the mobile and B2B/G segments.

Net Income Analysis

In 4Q 2021, loss before tax stood at RUB (0.6) billion, compared to RUB (0.7) billion in the corresponding period of 2020. In FY 2021, profit before tax increased by 20% to RUB 40.8 billion compared to FY 2020. Loss before tax in 4Q 2021 was caused by uneven distribution of certain expenses across the calendar year. The dynamics of profit before tax in FY 2021 was driven by higher operating income and no foreign exchange losses in 2021.

The recovery of income tax in 4Q 2021 was RUB 1.1 billion compared to income tax of RUB 0.8 billion in 4Q 2020. In FY 2021, income tax was RUB 9.0 billion compared to RUB 8.7 billion in FY 2020. The recovery of income tax in 4Q 2021 was driven by the tax effect related to one-off accruals. The dynamics of income tax in FY 2021 was driven by changes in profit before tax, as well as expenditures, which are not deductible for tax purposes.

Net income in 4Q 2021 stood at RUB 0.5 billion, compared to RUB (1.5) billion the corresponding period of 2020, and in FY 2021 - net income increased by 26% to RUB 31.8 billion versus the FY 2020.

Financial review

Net operating cash flow in 4Q 2021 remained almost intact and reached RUB 59.3 billion, compared to the corresponding period of 2020. In FY 2021 net operating cash flow increased by 11% to RUB 152.5 billion compared to FY 2020.

Cash outflow for investments in non-current assets excluding state programmes in 4Q 2021 increased by 18% to RUB 42.5 billion (25.3% of revenue) and including state programmes it increased by 9% to RUB 56.6 billion (33.6% of revenue). Cash outflow for investments in non-current assets excluding state programmes in FY 2021 increased by 11% to RUB 118.7 billion (20.5% of revenue) and including state programmes it increased by 9% to RUB 147.8 billion (25.5% of revenue).

FCF in 4Q 2021 totalled RUB 15.9 billion compared to RUB 19.6 billion in 4Q 2020. Free cash flow in FY 2021 increased by RUB 9.8 billion (+43% year-on-year) and reached RUB 32.5 billion. The FCF dynamics in 4Q 2021 and FY 2021 was driven by OIBDA growth, changes in working capital, mainly due to higher advance payments for platform solutions projects for the digital government. This in turn determined a more intensive investment programme in the end of 2021.

Free Cash Flow (RUB, billion)

As at December 31, 2021, including lease liabilities, the Group's total debt increased by 12% and amounted to RUB 568.7 billion, partially driven by the increase in lease liabilities following the reconsideration of capitalisation terms in rent contracts. 100% of the Group's total debt remained rouble-denominated as at December 31, 2021.

As at December 31, 2021, the Group's net debt, including lease liabilities, increased by 8% compared to the beginning of the year and amounted to RUB 505.2 billion. The net debt /OIBDA ratio[12] decreased to 2.3x from 2.4x for the last twelve months.

* * *

APPENDICES

1. Reconciliation of OIBDA;
2. Statement of Comprehensive Income for FY 2021;
3. Statement of Cash Flows for FY 2021;
4. Statement of Financial Position for FY 2021.

APPENDIX 1: RECONCILIATION OF OIBDA

OIBDA is a non-U.S. GAAP and non-IFRS financial measure, which the Company defines as operating income before depreciation and amortisation as well as some certain expenses. 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.

The following indicators are not taken into account in the calculation of OIBDA:

• Expenses related to the long-term management incentive programme, implying accruals in personnel costs line;
• Expenses related to non-government pension insurance.

RUB million	4Q 2021	4Q 2020	change	2021	2020	change
Operating income	8,009	7,295	10%	73,707	68,965	7%
Plus amortisation	(39,428)	(35,245)	12%	(140,059)	(119,702)	17%
Plus expenses related to the long-term management incentive programme	(1,243)	(1,679)	(26%)	(3,744)	(4,205)	(11%)
Plus expenses related to non-government pension insurance	(436)	(272)	60%	(1,304)	(1,178)	11%
OIBDA	49,116	44,491	10%	218,814	194,050	13%
OIBDA margin, %	29.2%	27.3%		37.7%	35.5%

APPENDIX 2: Statement of Comprehensive Income for FY 2021

		Year ended 31 December
		2021	2020 (restated)
Revenue		580,092	546,889
Operating expenses
Wages, salaries, other benefits and payroll taxes		(137,209)	(136,389)
Depreciation, amortization and impairment losses		(140,059)	(119,702)
Interconnection charges		(96,816)	(95,635)
Materials, utilities, repairs and maintenance		(43,426)	(40,302)
Gain on disposal of property, plant and equipment and intangible assets		9,051	5,992
Impairment loss of financial assets measured at amortized cost		(1,911)	(7,165)
Other operating income		20,736	21,883
Other operating expenses		(116,751)	(106,606)
Total operating expenses, net		(506,385)	(477,924)
Operating profit		73,707	68,965
Share of net profit of associates and joint ventures		261	969
Financial income		2,205	2,032
Finance costs		(38,923)	(36,670)
Other investing gain/(loss), net		3,230	(91)
Foreign exchange gain/(loss), net		336	(1,183)
Profit before income tax		40,816	34,022
Income tax expense		(8,984)	(8,659)
Profit for the year		31,832	25,363
Other comprehensive income/(loss)
Other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods
Exchange differences on translation of foreign operations		196	181
Net other comprehensive income to be reclassified to profit or income in subsequent periods		196	181
Other comprehensive income/(loss) not to be reclassified to profit or loss in subsequent periods
Remeasurement of defined benefit pension plans		75	21
Share of other comprehensive income of associates		57	-
Income tax on remeasurement of defined benefit pension plans		(15)	(4)
Net other comprehensive income not to be reclassified to profit or loss in subsequent periods		117	17
Other comprehensive income for the year, net of tax		313	198
Total comprehensive income for the year		32,145	25,561
Profit attributable to:
Equity holders of the Group		28,549	23,326
Non-controlling interests		3,283	2,037
Total comprehensive income attributable to:
Equity holders of the Group		28,862	23,524
Non-controlling interests		3,283	2,037
Earnings per share attributable to equity holders of the Group - basic (in roubles)		8.50	7.43
Earnings per share attributable to equity holders of the Group - diluted (in roubles)		8.40	7.32

APPENDIX 3: Statement of Cash Flows for FY 2021

		Year ended 31 December
		2021	2020  (restated)
Cash flows from operating activities
Profit before tax		40,816	34,022
Adjustments to reconcile profit before tax to cash generated from operations
Depreciation, amortization and impairment losses		140,059	119,702
Gain on disposal of property, plant and equipment and intangible assets		(9,051)	(5,992)
Impairment loss of financial assets measured at amortized cost		1,911	7,165
Share of net profit of associates and joint ventures		(261)	(969)
Finance income		(2,205)	(2,032)
Finance costs excluding finance costs on employee benefit obligations		38,889	36,622
Other investing gain/(loss), net		(3,230)	91
Foreign exchange (gain)/loss, net		(336)	1,183
Share-based motivation program		3,508	3,860
Increase in accounts receivable and contract assets		(13,004)	(7,278)
Increase in employee benefits		236	321
Increase in inventories		(1,769)	(243)
Increase in accounts payable, provisions and accrued expenses		11,182	11,094
Increase in contract costs, prepayments and other assets		(17,022)	(16,873)
Increase/(decrease) in other liabilities		10,690	(2,064)
Net cash generated from operations before income tax and interests paid		200,413	178,609
Interest paid		(39,043)	(35,594)
Income tax refund		42	1,706
Income tax paid		(8,942)	(7,931)
Net cash from operating activities		152,470	136,790
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets		(147,840)	(135,987)
Proceeds from sale of property, plant and equipment, intangible assets and assets held for sale		10,333	6,236
Acquisition of financial assets		(24,356)	(14,196)
Proceeds from disposals of financial assets		19,253	11,461
Interest received		1,118	719
Subsidy from Government		16,418	14,901
Dividends received		444	569
Purchase of subsidiaries and business, net of cash acquired		(2,661)	(119,444)
Distribution received from joint venture		399	1,665
Proceeds from disposals of equity accounted investees		462	-
Proceeds from disposal of subsidiaries, net of cash disposed		195	(74)
Acquisition of equity accounted investees		(722)	(1,574)
Net cash used in investing activities		(126,957)	(235,724)
Cash flows from financing activities
Issue of share capital		-	66,000
Purchase of treasury shares		(4,343)	-
Proceeds from bank and corporate loans		591,793	847,214
Repayment of bank and corporate loans		(566,040)	(852,883)
Proceeds from bonds		14,944	50,000
Repayment of bonds		(1,945)	(1,934)
Repayment of vendor financing payable		-	(2)
Proceeds from / (repayment of) other non-current financing liabilities		-	(29)
Proceeds from sale of non-controlling interests		-	35,000
Repayment of lease liabilities		(18,560)	(14,682)
Acquisition of non-controlling interests		(4,480)	(36)
Dividends paid to shareholders of the Group		(16,797)	(16,664)
Dividends paid to non-controlling shareholders of subsidiaries		(1,750)	(1,433)
Net cash (used in)/from financing activities		(7,178)	110,551
Effect of exchange rate changes on cash and cash equivalents		20	(357)
Net increase in cash and cash equivalents		18,355	11,260
Cash and cash equivalents at beginning of the year		31,215	19,955
Cash and cash equivalents at the end of the year		49,570	31,215

APPENDIX 4: Statement of Financial Position for FY 2021

		31 December 2021	31 December 2020 (restated)
Assets
Non-current assets
Property, plant and equipment		607,638	575,851
Goodwill and other intangible assets		149,007	141,184
Right of use assets		113,202	95,733
Trade and other accounts receivable		7,174	6,317
Investments in associates and joint ventures		14,056	10,896
Other financial assets		3,017	815
Other non-current assets		13,063	12,900
Deferred tax assets		10,666	9,027
Contract assets		439	972
Contract costs		16,749	16,326
Total non-current assets		935,011	870,021
Current assets
Inventories		12,572	10,792
Contract assets		7,758	6,710
Contract costs		947	674
Trade and other accounts receivable		59,190	50,166
Prepayments		11,429	8,953
Prepaid income tax		1,842	1,377
Other financial assets		13,965	11,482
Other current assets		9,888	7,892
Cash and cash equivalents		49,570	31,215
Asset classified as held for sale		716	831
Total current assets		167,877	130,092
Total assets		1,102,888	1,000,113
Equity and liabilities
Equity attributable to equity holders of the Group
Share capital		95	95
Treasury shares		(13,345)	(14,374)
Retained earnings and other reserves		200,726	194,424
Total equity attributable to equity holders of the Group		187,476	180,145
Non-controlling interests		39,926	37,604
Total equity		227,402	217,749
Non-current liabilities
Loans and borrowings		342,136	372,406
Lease liabilities		103,722	86,392
Employee benefits		6,906	6,670
Deferred tax liabilities		44,641	41,851
Accounts payable and accrued expenses		1,047	1,580
Contract liabilities		15,300	15,811
Provisions		5,730	5,848
Other non-current financial liabilities		21,443	10,774
Other non-current liabilities		43,286	32,831
Total non-current liabilities		584,211	574,163
Current liabilities
Loans and borrowings		102,271	32,535
Lease liabilities		20,603	17,399
Accounts payable and accrued expenses		82,401	96,082
Income tax payable		3,365	3,023
Contract liabilities		42,512	34,680
Provisions		22,816	9,413
Other financial liabilities		-	1,914
Other current liabilities		17,307	13,155
Total current liabilities		291,275	208,201
Total liabilities		875,486	782,364
Total equity and liabilities		1,102,888	1,000,113

PJSC Rostelecom is the largest integrated digital services and products provider, operating in all segments of the telecommunications market in Russia. The Company serves millions of households, state and private enterprises across the country.

Rostelecom is Russia's undisputed market leader, providing high-speed Internet access and pay-TV. The total number of fibre broadband users stands at c.11 mln users, it has 11 mln pay-TV customers, over 6.4 mln of which are subscribed to Rostelecom's IPTV services. Tele2 Russia, a Rostelecom subsidiary, is a major player in the mobile market with over 47.5 mln subscribers and the industry-leading NPS, a customer satisfaction benchmark.

During the FY 2021, the Group generated RUB 580.1 bln of revenues, RUB 218.8 bln of OIBDA (37.7% of revenue) and RUB 31.8 bln of net income.

The Group is the leading provider of telecommunications services to government bodies and corporates of all levels.

Rostelecom is a key strategic innovator that provides solutions in the following fields: E-Government, cybersecurity, data-centres and cloud computing, biometry, healthcare, education and housing & utility services.

*   *   *

Certain statements in this press release are forward-looking statements within the meaning of the U.S. federal securities laws and intended to be covered by the safe harbours created thereby.

Those forward-looking statements include, but are not limited to:

• Assessment of PAO Rostelecom's (the Company) future operating and financial results as well as forecasts of the present value of future cash flows and related factors;
• The Company's plans to take ownership stakes in other organisations;
• the Company's anticipated capital expenditures and plans to construct and modernize its network;
• the Company's expectations as to the growth in demand for its services, plans relating to the expansion of the range of its services and their pricing;
• the Company's plans with respect to improving its corporate governance practices;
• the Company's expectations as to its position in the telecommunications market and forecasts on the development of the market segments within which the Company operates;
• economic outlook and industry trends;
• the Company's expectations as to the regulation of the Russian telecommunications industry and assessment of impact of regulatory initiatives on the Company's activity;
• other statements regarding matters that are not historical facts.

Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include:

• risks relating to changes in political, economic and social conditions in Russia as well as changes in global economic conditions;
• risks relating to Russian legislation, regulation and taxation, including laws, regulations, decrees and decisions governing the Russian telecommunications industry, securities industry as well as currency and exchange controls relating to Russian entities and their official interpretation by regulatory bodies;
• risks relating to the Company, including the achievement of the anticipated results, levels of profitability and growth, ability to create and meet demand for the Company's services including their promotions, and the ability of the Company to remain competitive in a liberalized telecommunications market;
• technological risks associated with the functioning and development of the telecommunications infrastructure, technological innovations as well as the convergence of technologies;
• other risks and uncertainties. For a more detailed discussion of these and other factors, see the Company's Annual Report and the Company's other public filings.

Many of these factors are beyond the Company's ability to control or predict. Given these and other uncertainties, readers are cautioned not to place undue reliance on any of the forward-looking statements contained herein or otherwise. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements (which are made as of the date hereof) to reflect events or circumstances upon the annual report publication or to reflect the occurrence of unanticipated events, except as may be required under applicable laws.

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[1] Here and below, please refer to Attachment 1 of this statement for a full definition of OIBDA.

[2] Here and below Free Cash Flow ("FCF") is calculated as net cash from operating activity minus CAPEX, plus proceeds from selling fixed assets and intangible assets, plus interest received, plus subsidy from government.

[3] Here and below, capital expenditure ("CAPEX") comprises cash spent on fixed assets and intangible assets.

[4] Here and below, Net Debt is calculated as long-term and short-term loans and borrowings, (a) plus long- and short-term lease liabilities, (b) minus cash and cash equivalents, and (c) minus other financial assets.

[5] Average revenue per user

[6] Based on GFK data

[7] Payment Card Industry Data Security Standard

[8] Operator to Operator

[9] Customers

[10] Corporate and government clients

[11] Operators

[12] OIBDA for the last twelve months

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ISIN:	US7785291078
Category Code:	ACS
TIDM:	RKMD
LEI Code:	2534001D752JPNM0H170
Sequence No.:	146813
EQS News ID:	1294351

End of Announcement	EQS News Service

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