Rostelecom — Earnings Release 2019

May 16, 2019

15-May-2019 / 09:47 MSK Dissemination of a RegulatoryAnnouncement 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.

ROSTELECOM ANNOUNCES ITS IFRS FINANCIAL AND OPERATING RESULTS FOR THE FIRST QUARTER OF 2019

DIGITAL SEGMENT [1] GROWTH OF 10%; 12% INCREASE IN OIBDA [2] ; NET PROFIT UP 46%

Moscow, Russia - May 15, 2019 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), the largest digital service provider in Russia, today announces its consolidated financial results for the first quarter of 2019 prepared in accordance with IFRS [3] .

KEY ACHIEVEMENTS

• Revenue grew by 3% year-on-year in the first quarter of 2019 despite a high comparable base due to non-recurring items reported in the first quarter of 2018; revenue was up 6% on a like-for like basis;
• The digital segment sales increased by 10% in the reporting quarter, while it s contribution to total revenue reached 5 6%;
• OIBDA grew by 12% in the first quarter of 201 9 to RUB 26.4 bilion
• Net profit increased by 4 6% in the first quarter of 201 9 to RUB 5.6 bilion;
• The retail customer segment, which accounts for 45% of the Company's revenues, demonstrated the best dynamics havingincreased by 3.4% y ear-on-y ear; other business segments also grew by 3% y ear-on-y ear;

;

Consistently g rowing ARPU across broadband and IPTV segments .

FIRST QUARTER 2019 FINANCIAL HIGHLIGHTS

• Revenue grew by 3% to RUB 7 8.7 bilion compared to the first quarter of 201 8;
• OIBDA up by 12% to RUB 26.4 bilion;
• OIBDA margin grew by 2.6 p.p. to 33.5 % compared to the first quarter of 201 8;
• Net profit increased by 46% to RUB 5 .6 bilion compared to the first quarter of 201 8;
• CAPEX [4] increased by 48% to RUB 22.3 bilion ( 28.4% of revenue) from RUB 15.1 bilion ( 19.8% of revenue) in the first quarter of 2018;
• Free Cash Flow (FCF) of RUB ( 14.6) [5] bilion compared to RUB ( 5 .8) bilion in the first quarter of 201 8;
• Net debt [6] increased by 12% since the beginning of the year to RUB 208.4 bilion, resulting in a Net Debt/OIBDA ratio of 2.0x.

RUB million	1Q 2019	1Q 2018	change, y-o-y
Revenue	78,667	76,203	3%
OIBDA	26,381	23,551	12%
OIBDA margin %	33.5%	30.9%	-
Operating Income	9,709	8,357	16%
Operating margin %	12.3%	11.0%	-
Net Income	5,631	3,864	4 6%
of % revenue	7.2%	5.1%	-
Capital Expenditure	22,343	15,125	48 %
% of revenue	28.4%	19.8%	-
Net debt		208,369 191,788	9%
Net debt/ annualised OIBDA	2.0	1.9	-
FCF	(14,583)	(5,848)	( 8 ,735 )

Key figures for 1Q 2019, RUB mln

Mikhail Oseevskiy, President of Rostelecom, commented:

" The strong first quarter of 2019 came in line with our expectations, resulting in growth across key financial indicators. Total revenue increased by 3%, but one of the most significant achievements this quarter was the significant improvement inOIBDA, up 12%, growth in OIBDA margin by 2.6 percentage points to 33.5% and a 46% increase in net income. These achievements were mainly driven by the expansion of our digital services ecosystem across key client groups and an increase inrevenues per user . We remain committed to the digital transformation of our business with digital and content services forming the basis of our strategy. The team has set ambitious priorities and we are proud of our leading positions in our key markets.

Rostelecom continues to use its network infrastructure to launch the type of innovative digital services that are transforming theCompany. Last month we introduced Rostelecom Health, a mobile app and website that provides quick, online around-the-clockmedical consultation with GPs and specialist doctors, available by appointment . Our new service alows our clients to seek expert medical help from a GP or Doctor via an online chat or videocal, any day of the week a nd anywhere, this way avoidingtraveling and queues. Individual and family schemes are available within the new platform so to enable users t o take care of their loved ones.

We have also continued to expand our "Smart Home" offering , completing the sale of 100,000 cameras for cloud-based homesurveilance systems that enable customers to monitor their properties from any part of the world.

We are gaining industry recognition for delivering cloud-based services . W e were ranked number one by TMT Consulting for thenumber of hosted PBX clients in 2018, a year in which Rostelecom's market share more than doubled from 11% to 24%.

Among key factors contributing to our successful promotion of the hosted PBX service, apart from the "Plus Account" offer, areour omni-channel tactics to attract new clients, tailored approach to targeting and advertising in each region, as wel as atransparent and straightforward pricing, underpinned by the multifunctional nature of the service.

We remain committed to delivering on our digital strategy , developing digital solutions and friendly ecosystems of services whileinvesting in human capital. Our superior network infrastructure and highly motivated team wil continue to underpin our lead ing positions in providing digital services to al types of clients ."

Sergey Anokhin, Senior Vice-President and Chief Financial Officer, added:

" Rostelecom's results for the first quarter o f 2019 reflect our confident outlook for the future development of the digital segment. In addition to expanding our digital segment, we are introducing measures aimed at improving internal efficiency. Weexpect our performance to continue to improve across al key financial indicators. Therefore, we reiterate our guidance for theful year of 2019 and we anticipate an increase in revenue and OIBDA of no less than 2.5 %, based on CAPEX of RUB 6 5 -70bilion, including the regulatory CAPEX amounting to RUB 7 bilion , excluding the implementation of government programmes."

KEY OPERATING HIGHLIGHTS

Number of subscribers (million):		1Q 2019 1Q 2018	change, y-o-y	4Q 2018	change, y-o-y
Internet access	13.0	12.9	0 .5 %	13.0	( 0 .1%)
B2C: Broadband	12.0	12.0	0 .1%	12.0	( 0 .1%)
B2B: Broadband + VPN	1.0	1.0	5 %	1.0	(1%)
Pay TV	10.2	9.9	3 %	10.2	0 .2%
Incl. IPTV	5.4	5.0	8%	5.3	1%
MVNO subscribers	1.3	0.9	43%	1.2	6%
Local telephony services	17.0	18.7	(9%)	17.4	(2%)

[7] ( ): ARPU RUB		1Q 2019 1Q 2018	change, y-o-y	4Q 2018	change, y-o-y
Internet access
B2C: Broadband	397	376	6%	392	1%
B2B: Broadband + VPN	3,266	3,029	8%	3,160	3%
Pay TV (B2C)	249	238	5%	251	(1%)
Incl. IPTV	317	308	3%	328	(3%)
[8] Blended ARPU	543	510	7%	549	(1%)

Total subscriber base and ARPU

• 1. T he total number of B2C Internet subscribers grew by 0.1% to 12.0 million in the first quarter of 2019 compared to the corresponding period of last year; ARPU was up 6% year-on-year to RUB 397.
• 1. The total number of B2B Internet and VPN subscribers increased by 5% year-on-year to 1.0 million; ARPU grew by 8% year-onyear to RUB 3,266.
• 1. The number of pay-TV subscribers grew by 3% to 10.2 million households compared to the corresponding period of last year with ARPU of RUB 249, up 5% year-on-year;
  2. The number of IPTV subscribers increased by 8% to 5.4 million with ARPU of RUB 317;
• 1. The number of MVNO subscribers increased by 43% and reached 1.3 million users;
• 1. The number of local telephony subscribers decreased by 9% to 17.0 million.

KEY EVENTS RELATING TO 1Q 2019 AND AFTER THE END OF THE REPORTING PERIOD

Business news

• Rostelecom continues to develop and expand its range of products and services:
  • A new offer "For friends" was made available for new and existing clients from 1 March 2019: for RUB 199, clients can enjoy faster Internet speed and choose between mobile communication, IPTV, video surveillance service or the e-learning platform;
  • As part of the "Gaming" tariff plan, Rostelecom renewed the set of bonuses for new game weapons (Warface option) and launched a website with all available options - www.gg.rt.ru;
  • Jointly with Sberbank, Rostelecom launched a loyalty programme "Exchange "THANK YOU" on WINK";
  • The Company launched direct sales of ESET antivirus solutions (bypassing aggregator platforms), as well as sales of antivirus products by its subsidiary company "Bashinformsvyaz";
  • A new pilot service to provide remote IT assistance through user's personal online area was launched in Rostelecom's offices across the "South" regional network;
  • A new service "Guarantee+" was introduced to protect clients from financial losses for user equipment damage. The warranty also covers power strikes, leaks from neighbouring properties or attributed to public utilities, fire, hooliganism or theft;
  • A new digital service "Rostelecom Taxes" and a website www.nalog.rt.ru were launched on a pilot basis, allowing clients to draft tax statements and apply for a tax deduction;
  • As part of the "Smart Home" ecosystem:
• new tariff plans were launched within its home video surveillance service, including "Continuous recording" and "FullHD" (high-quality recording);
• introduced a new offering "Video for 350";

Within the MVNO project development the Company introduced convergent-offer across all offices within the "Ural" regional network;

• Rostelecom continues to grow its digital segment:
  • Rostelecom was ranked number one by the number of hosted PBX clients in the 2018 TMT Consulting Rating; the Company's market share more than doubled to 24% from 11%;
  • Rostelecom, Tele2 and Nokia successfully completed testing Internet of Things (IoT) utility solutions for households, based on Russian network infrastructure;
  • Rostelecom launched a new digital service 'Rostelecom Health' a mobile application and website for online around-the-clock medical consultation with GPs and specialist doctors, available by appointment.
• Rostelecom generated a two-fold growth of revenues from its O2O [9] project in the first quarter of 2019;
• Within the contract with Vodafone, Rostelecom p u t the Hong-Kong-Frankfurt channel with 100Gbps capacity into commercial operation;
• The Company commissioned 6 distributed radio access points (ADAS) in remote areas.

Other news

• The Board of Directors of Rostelecom approved a revised dividend policy to amend free cash flow ("FCF") methodology for dividends calculation. The amended FCF has been increased by subsidy from government;
• Rostelecom paid an interim dividend for 9 months of 2018 of RUB 2.5 per ordinary share;
• The Company acquired Infolink Group of companies, one of the leading Internet services providers in the Chuvash Republic.
• In March 2019, Rostelecom announced the placement of bonds at a coupon rate of 8.45% per annum. The bonds' total nominal value is of RUB 15 billion.
• The Analytical Credit Rating Agency (ACRA) assigned an AA(RU) credit rating to the RU000A100881 bond issued by Rostelecom.

OPERATING REVIEW

Revenue analysis

Revenue structure by services

RUB million		1Q 2019 1Q 2018	change
Broadband	20,938	19,183	9%
TV services	9,293	8,175	14%
Fixed telephony	16,087	18,283	( 12%)
Wholesale services	20,387	19,399	5%
Rent of channels	2 ,386	2,297	4%
and traffic Interconnect transit services	8 ,435	8,376	1%
VPN	6,100	5,524	10%
and of telecommunications infrastructure Rent maintenance	3 ,465	3,203	8%
VAS and cloud services	7,653	7,237	6%
Other telecommunications services	2,817	2,610	8%
Other non-telecommunications services	1,491	1,317	13%
Total	78,667	76,203	3%

Revenue structure by customer segments

RUB million		1Q 2019 1Q 2018	change
Residential customers 35,247		34,086	3%
B2B / State clients	27,931	27,074	3%
Operators	14,402	13,986	3%
Other	1,087	1,058	3%
Total	78,667	76,203	3%

In the first quarter of 2019, revenue increased by 3% to RUB 78.7 billion, compared to the first quarter of 2018, a s a result of the following factors:

• a 9% increase in revenue from broadband services due to a higher number of subscribers and higher ARPU;
• a 14% increase in revenue from pay-TV services due to growth in the IPTV subscriber base and higher ARPU;
• a 10% increase in revenue from VPN services, mainly due to higher demand from state clients;
• a 6% increase in revenue from VAS and cloud services, mainly due to the proceeds from "Smart City" projects, the promotion of cloud services and data-centres. The modest comparable growth dynamics of this business segment is mainly due to a higher base in the first quarter of 2018 on the back of the one-off project to provide video surveillance during the presidential election in Russia. Excluding the one-off project effect, the increase in revenue from VAS and cloud services was 46%.

Operating income analysis

Operating expenses structure

RUB million	1Q 2019	1Q 2018	change
Personnel costs	(25,310)	(24,485)	3%
Depreciation, Amortization and impairment losses	(15,506)	(14,078)	10%
Interconnection charges	(14,233)	(14,144)	1%
Materials, repairs and maintenance, utilities	(6,469)	(6,338)	2%
Gain on the disposal of PPE and intangible assets	657	418	57%
Impairment loss of financial assets measured at amortized cost	(1,121)	(1,275)	( 12 %)
Other operating income	3,799	3,585	6%
Other operating expenses	(10,775)	(11,529)	( 7%)
Total operating expenses	(68,958)	(67,846)	2%

In the first quarter of 2019, operating expenses increased by 2% compared to the corresponding period of 2018 and amounted to RUB 69.0 billion, largely due to the following factors:

• a 10% increase (of RUB 1.4 billion) in depreciation, amortization and impairment losses, due to a reduced effect from revised terms of useful life and higher payments associated with new objects and intangible assets following the acquisition of additional software and content;
• a 3% increase (of RUB 0.8 billion) in personnel costs, mainly due to an increase in the number of employees within the digital business segments, in part through newly acquired subsidiary companies;
• a 7% decrease (of RUB 0.8 billion) in other operating expenses, mainly due to the legislative amendments to corporate property tax, as well as higher base in the first quarter of 2018 due to higher additional expenses related to providing video surveillance during the presidential election in Russia.

Operating profit increased by 16% year-on-year to RUB 9.7 billion in the first quarter of 2019, compared to the corresponding period of 2018.

OIBDA for the first quarter of 2019 increased by 12% year-on-year to RUB 26.4 billion. OIBDA dynamics were driven by revenue growth and the above-mentioned factors, affecting operating expenses. The OIBDA margin increased by 2.6 p.p. to 33.5% in the first quarter of 2019 compared to the corresponding period of 2018.

Net Income Analysis

In the first quarter of 2019, profit before tax increased by 41% to RUB 6.9 billion, compared to the corresponding period in 2018.

These dynamics were influenced by the following factors:

• higher operating profit;
• improved associated companies' financial results, mainly from the joint venture with Tele2 Russia;
• higher financial expenditure, including due to an increase in interest payments.

Income tax in the first quarter of 2019 increased by 24% to RUB 1.2 billion.

The effective income tax rate was at 18% in the first quarter of 2019, compared to the 20% rate set by the Tax Code.

Net profit increased by 46% in the first quarter of 2019 and totalled RUB 5.6 billion.

Financial review

Net operating cash flow in the first quarter of 2019 decreased by 22% and amounted to RUB 6.5 billion, compared to the corresponding period of 2018. The decrease in net operating cash flow in the first quarter of 2019 was mainly due to changes in working capital, which was partly driven by an bigger increase in accounts receivable, a bulk of which is expected to be paid in the second quarter of 2019. The decrease in net operating cash flow was also driven by a smaller increase in accounts payable in the reporting period.

Cash outflow for investments in non-current assets increased by 48% to RUB 22.3 billion (28.4% of revenue) in the first quarter of 2019. Excluding state programmes, it increased by 31% to RUB 16.4 billion (20.8% of revenue). These dynamics reflect an increase in capital expenditure on government-funded programmes during the reporting period, as well as the uneven distribution of expenditure during a calendar year according to the terms of the concluded contracts.

Free cash flow in the first quarter of 2019 totalled RUB (14.6) billion compared to RUB (5.8) billion in the first quarter of 2018.

Free Cash Flow (RUB, billion)

As at March 31, 2019, the Group's total debt increased by 9% compared to the beginning of the year and amounted to RUB 222.2 billion. Over 99% of the Group's total debt was rouble-denominated as at March 31, 2019.

As at March 31, 2019, the Group's net debt increased by 12% compared to the beginning of the year and amounted to RUB 208.4 billion. The net debt /OIBDA ratio stood at 2.0x at 31 March 2019.

OTHER INFORMATION: CONFERENCE CALL

Rostelecom's management will hold a conference call and webcast today at 4.00 PM (Moscow), 3.00 PM (CET), 2.00 PM (UK) and 9.00 AM (NYT). To participate in the conference call, please dial:

UK/ International:	+44 (0) 330 336 9126
USA:	+1 646 828 81 44
Russia:	+7 495 213 1767

Confirmation Code (ENG): 4194015 Confirmation Code (RUS): 1553968

A webcast of the conference call will only be available in English. To access the webcast please follow the link: https://webcasts.eqs.com/register/rostelecom20190515/en.

A replay of the conference call will be available on the Company's website https://www.company.rt.ru/en/ir/results_and_presentations/financials/IFRS/2019/1/.

* * *

APPENDICES

• 1. Reconciliation of OIBDA;
• 1. IFRS 9, 15 and 16 standards application;
• 1. Statement of Comprehensive Income for the three months of 2019;
• 1. Statement of Cash Flows for the three months of 2019;
• 1. Statement of Financial Position for the three months of 2019.

APPENDIX 1: RECONCILIATIONOFOIBDA

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-termmanagement incentive programme, implying accruals in personnel costs line starting fromQ2, 2014;

Expenses related to non-government pension insurance starting fromQ3, 2018.

million RUB	1Q 2019	1Q 2018	change
Operating income	9,709	8,357	16%
Plus amortisation 15,506		14,078	10%
Plus expenses related to the long-term management incentive programme	887	758	% 17
Plus expenses related to non-government pension insurance	279	358	-
OIBDA	26,381	23,551	12 %
margin, OIBDA %	33.5%	30.9%

APPENDIX 2: IFRS 9, 15 and 16 STANDARDS APPLICATION

The Group initially adopted IFRS 9, 15 and 16 using the modified retrospective approach starting from the first quarter of 2018. The key changes related to the application of these standards are listed below:

Expenses related to the operating leases have been capitalized and are reflected in the accounting balance sheet under the title "Right-of-use assets (RoU)". The RoU related liabilities are reflected in relative balance lines under same titles;

The expenses related to the conclusion and implementation of contracts with customers have been capitalized and are reflected under "Revenue from Contracts with Customers";

Assets for contracts with customers in arrears on payments for services rendered, but yet not invoiced, were excluded from the accounts receivable balance;

Revenues from the sale of goods or provision of services of not sufficient individual value to customers, have been deferred;

Recurring advances, containing the financing component, have been discounted;

Impairment provisions of financial assets are recognised on the basis of expected credit losses.

APPENDIX 3: Statement of Comprehensive Income for the three months of 2019

	Three-month period ended 31 March (unaudited)
	2019	2018
Revenue	78,667	76,203
Operating expenses
Wages, salaries, other benefits and payroll taxes	(25,310)	(24,485)
Depreciation, amortization and impairment losses	(15,506)	(14,078)
Interconnection charges	(14,233)	(14,144)
Materials, utilities, repairs and maintenance	(6,469)	(6,338)
Gain on disposal of property, plant and equipment and intangible assets	657	418
Impairment loss of financial assets measured at amortized cost	(1,121)	(1,275)

Other operating income	3,799	3,585
Other operating expenses	(10,775)	(11,529)
Total operating expenses, net	(68,958)	(67,846)
Operating profit	9,709	8,357
Share of net profit/(loss) of associates and joint ventures	998	4
Finance costs	(4,575)	(4,054)
Other investing and financial gain, net	313	565
Foreign exchange gain/(loss), net	420	(9)
Profit before income tax	6,865	4,863
Income tax expense	(1,234)	(999)
Profit for the period	5,631	3,864

Other comprehensive income/(loss)

Other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods

Exchange differences on translating foreign operations, net of tax Other comprehensive income/(loss) for the period, net of tax	(225) (225)	3 3
Total comprehensive income for the period	5,406	3,867
Profit attributable to: Equity holders of theGroup Non-controlling interests	5,460 171	3,703 161
Total comprehensive income attributable to: Equity holders of theGroup Non-controlling interests	5,222 184	3,707 160
Earnings per share attributable to equity holders of theGroup - basic (in roubles) Earnings per share attributable to equity holders of theGroup - diluted (in roubles)	2.38 2.32	1.65 1.61

APPENDIX 4: Statement of Cash Flows for the three months of 2019

	Three-month period ended 31 March (unaudited)
	2019	2018
Cash flows from operating activities
Profit before tax	6,865	4,863
Adjustments to reconcile profit before tax to cash generated fromoperations
Depreciation, amortization and impairment losses	15,506	14,078
Gain on disposal of property, plant and equipment and intangible assets	(657)	(418)
Impairment loss of financial assets measured at amortized cost	1,121	1,275
Gain fromassociates and joint ventures	(998)	(4)
Finance costs excluding finance costs on employee benefit obligations	4,559	4,022
Other investing and financial gain, net	(313)	(565)
Foreign exchange (gain)/loss, net	(420)	9
Share-based motivation program	856	707
Increase in accounts receivable and contract assets	(10,143)	(8,787)
Increase in employee benefits	243	237
(Increase) in inventories	(108)	(662)
Increase in accounts payable, provisions and accrued expenses	326	3,364
Increase in other assets	(2,063)	(2,252)
Decrease in other liabilities	(2,730)	(1,358)
Cash generated from operations	12,044	14,509
Interest paid	(4,740)	(4,586)
Income tax refund	72	-
Income tax paid	(868)	(1,615)
Net cash from operating activities	6,508	8,308
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets	(22,343)	(15,125)
Proceeds fromsale of property, plant and equipment, intangible assets and assets held for sale	906	826
Acquisition of financial assets	(972)	(1,644)
Proceeds fromdisposals of financial assets	1,399	1,963
Interest received	150	143
Subsidy fromGovernment	196	-
Dividends received	188	-
Purchase of subsidiaries and business, net of cash acquired	(301)	(548)
Acquisition of equity accounted investees	(346)	(3,375)
Net cash used in investing activities	(21,123)	(17,760)
Cash flows from financing activities
Proceeds from bank and corporate loans	175,851	171,190
Repayment of bank and corporate loans	(158,002)	(160,336)
Proceeds from bonds	-	10,000
Repayment of bonds	-	(11,133)
Repayment of vendor financing payable	(2)	(8)
Repayment of right of use liabilities	(1,012)	(758)
Acquisition of non-controlling interest	(398)	-
Dividends paid to shareholders of the Group	(5,688)	-
Net cash from financing activities	10,749	8,955
Effect of exchange rate changes on cash and cash equivalents	(44)	(19)
Net increase in cash and cash equivalents	(3,910)	(516)
Cash and cash equivalents at beginning of the period	10,080	3,815
Cash and cash equivalents at the end of the period	6,170	3,299

APPENDIX 5: Statement of Financial Position for the nine months of 2018

	31 March 2019 (unaudited)	31December 2018 (unaudited)
Assets
Non-current assets Property, plant and equipment	370,487	373,839
Investment properties	174	172
Goodwill and other intangible assets Right of use assets	66,595 21,122	66,083 21,205
Trade and other accounts receivable	5,433	7,346
Investments in associates and joint ventures Other financial assets	71,138 1,457	69,982 1,950
Other non-current assets	5,441	4,667
Deferred tax assets	1,104	863
Contract assets Contract costs	528 12,383	501 12,323
Total non-current assets	555,862	558,931
Current assets Inventories	7,750	7,631
Contract assets	12,958	9,511
Trade and other accounts receivable	51,809	44,189
Prepayments Prepaid income tax	5,435 2,854	4,380 984
Other financial assets	7,613	7,487
Other current assets Cash and cash equivalents	3,305 6,170	2,856 10,080
Assets classified as held for sale	572	554
Total current assets	98,466	87,672
Total assets	654,328	646,603
Equity and liabilities Equity attributable to equity holders of the Group
Share capital Additional paid-in capital	93 115	93 115
Treasury shares	(60,419)	(60,419)
Retained earnings and other reserves	312,791	307,234
Total equity attributable to equity holders of the Group	252,580	247,023
Non-controlling interests Total equity	4,003 256,583	3,909 250,932
Non-current liabilities
Loans and borrowings Lease liabilities	173,844 17,095	174,371 16,855
Employee benefits	4,918	4,675
Deferred tax liabilities Accounts payable, provisions and accrued expenses	41,468 3,312	38,269 3,090
Other non-current liabilities	20,069	21,142
Total non-current liabilities	260,706	258,402
Current liabilities
Loans and borrowings	48,308	29,908
Lease liabilities Accounts payable, provisions and accrued expenses	4,814 72,023	4,791 88,530
Income tax payable	45	644
Other current liabilities Total current liabilities	11,849 137,039	13,396 137,269
Total liabilities	397,745	395,671
Total equity and liabilities	654,328	646,603

PJSC Rostelecomis the largest digital service provider, operating in all segments of the telecommunications market in Russia, it serves millions of households, the state and private enterprises across the country.

Rostelecom is Russia's undisputed market leader, providing high-speed Internet access to over 13 million families and pay-TV services to more than 10.2 million families, over 5.4 million of which are subscribed to Rostelecom's IPTV services on a national level. Rostelecom's MVNO base is over 1.3 million users. The Company develops digital solutions for smart homes, online education, telemedicine and other services.

In the first three months of 2019, the Group generated RUB 78.7 billion of revenues, RUB 26.4 billion of OIBDA (33.5% of revenue) and RUB 5.6 billion of net income.

The Group is the leading provider of telecommunications services to government bodies and corporates of all levels with more than 1.0 million legal entities currently using Rostelecom's high-speed Internet services and VPN.

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

The Group's stable financial position is confirmed by its credit ratings. Rostelecom has been assigned 'BBB-' and 'BB+' international credit ratings by Fitch Ratings and Standard&Poor's respectively, and AA(RU) by ACRA.

* * * 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.

[5] Here and below, starting from2019, FreeCash Flow (FCF) is calculated as net cash fromoperating activity minus CAPEX, plus proceeds fromselling fixed assets and intangible assets, plus interest received, plus subsidy fromgovernment. Comparative statements of 2018 are given as they were disclosed in the corresponding period. [6] Here and below, Net Debt is calculated as total debt less cash, cash equivalents and short-terminvestments (other financial assets).

[7] Average revenue per user

[8] Blended ARPU includes revenue frombroadband, IPTV and digital cable TV

[9] Operator toOperator

ISIN: US7785291078 Category Code:IR TIDM: RKMD LEICode: 2534001D752JPNM0H170 Sequence No.: 8638 EQS News ID: 811447

End ofAnnouncementEQS News Service

^[2] Here and below, please refer toAttachment 1 of this statement for a full definition of OIBDA. Note that the company changed the methodology of OIBDAcalculation since 3q 2018 by excluding expenses related to non-government pension insurance. HistoricalOIBDAnumbers for 2018were recalculated in linewith the renewed methodology. [3] International financial reporting standards.

^[4] Here and below, capital expenditure ("CAPEX") comprises cash spent on fixed assets and intangible assets.