rostelecom announces its ifrs financial and operating results

for the THIRD quarter and NINE MONTHS OF 2020

Q3 2020 Revenue growth of 13%; 17% increase in OIBDA[1]; FCF[2] up 26%

FY 2020 guidance upgraded to >=9% Revenue & OIBDA growth

Moscow, Russia - November 11, 2020 - Rostelecom PJSC (MOEX: RTKM, RTKMP; OTCQX: ROSYY), the largest digital service provider in Russia, today announces its consolidated financial results for the third quarter and nine months of 2020 prepared in accordance with IFRS[3].

In accordance with the accounting policy of the Group, the acquisition of Tele2 Russia has been recognized as a business combination under common control. According to this method the merger of businesses arising from a transfer of entity stakes under common control of the Group's shareholders, is presented as if the merger took place in the earliest period of the statements, or, if later, effective from the date that common control was put into effect; for this purpose comparatives are revised. Rostelecom's consolidated financial statements for 2019 have therefore been revised to incorporate Tele2 Russia's performance as if the acquisition had been completed on 1 January 2019.

THIRD QUARTER 2020 FINANCIAL HIGHLIGHTS

• Revenue grew by 13% to RUB 135 billion compared to the third quarter of 2019;
  • mobile services revenue grew 14% year-on-year;
  •  digital services revenue grew 62% year-on-year;
• OIBDA up by 17% to RUB 53.7 billion;
• OIBDA margin grew by 1.5 p.p. to 39.8%;
• Net profit increased by 31% to RUB 12 billion;
• CAPEX[4] excluding state programmes stood at RUB 24.3 billion (18% of revenue) compared to RUB 18.8 billion (15.7% of revenue) in the third quarter of 2019;
• FCF increased by 26% to RUB 19.5 billion;
• Net debt[5] increased by 23% since the beginning of the year to RUB 410 billion, resulting in a Net Debt/OIBDA ratio of 2.2x.

Key figures for 3Q 2020

NINE MONTHS OF 2020 FINANCIAL HIGHLIGHTS

• Revenue increased by 12% to RUB 383.9 billion compared to the nine months of 2019;
• OIBDA increased by 15% year-on-year to RUB 149.6 billion;
• OIBDA margin grew by 1 p.p. to 39%;
• Net profit increased by 21% to RUB 27.4 billion;
• CAPEX stood at RUB 71 billion (18.5% of revenue) compared to RUB 62.8 billion (18.3% of revenue) in the nine months of 2019;
• FCF stood at RUB 4.7 billion compared to RUB 14.6 billion in the nine months of 2019;
• Net debt increased by 23% since the beginning of the year to RUB 410 billion, resulting in a Net Debt/OIBDA ratio of 2.2x.

Key figures for 9M 2020

Mikhail Oseevskiy, President of Rostelecom, commented:

"We delivered robust financial and operational growth in the third quarter of 2020. Growth across the Group remained on track with revenue up by 13%, OIBDA up 17% and FCF also up by 26%. Our key strategic business segments - mobile and digital services - continue to be successful as we remain focused on delivering Rostelecom's digital transformation strategy, which sets out our ambition to be the largest integrated digital company in Russia. Our ambitious digital economy projects, spanning a large variety of promising sectors, reinforce this solid growth trajectory. We continue to expand the industries we serve by entering new high-potential markets, building strong management teams to drive our robust marketing strategy to deliver growth into new and adjacent market segments. Through targeted M&A deals and partnerships, we are creating high-performing teams with diverse competencies to build on our competitive advantage. The acquisition of  utilities software developers Forkam and Fastech; the expansion of our product ecosystem with Elvis Plus, the leading security system integrator; the strengthening of our position in video content terrestrial delivery, all have significant potential to  expand and diversify products and solutions that sit within the growing ecosystem of Rostelecom business clusters.

We continue to develop smart digital solutions for business, government, and private users, and we will soon announce a refreshed strategy which will slightly recalibrate our focus. Built on strong recent achievements, the Rostelecom brand today represents a solid portfolio of fast-growing and high-potential businesses, that are currently undervalued by the market. Our key effort builds on delivering commercial and operational success, within these new business clusters, in order to unlock their potential and ultimately, the true value of our company. In addition to this strong focus on new growth projects and strengthening our position on the digital frontier, we plan to maintain an attractive dividend yield, which, coupled with steady business growth, shapes a unique long-term investment opportunity."

Vladimir Kirienko, First Vice-President of Rostelecom, commented:

"The recent achievements in key markets and across our business segments continue to translate into strong and steady growth while strengthening the long-term digital leadership of Rostelecom. Our constantly evolving digital offering continues to yield impressive results. The demand for cyber security solutions has increased more than two and a half times, while data centers and cloud/IaaS both have both doubled. E-government, video-webcast, smart household products and cloud telephony are performing increasingly well too. The introduction of new timely options and offerings within our digital product family has been well received by customers. Our strategic nation-wide convergent approach is paying off with increased clients' loyalty and growing sales. An example of this was the launch in cooperation with Tele2 of a new offer "Everywhere online" that provides our clients with special subscription deals for the Wink entertainment platform which is becoming increasingly popular. In October, we broke Wink's own concurrent viewers record with 3 million users watching the live stream of Khabib Nurmagomedov's fight with Justin Gaethje, final match in Khabib's storied career.. 

For our corporate clients, we launched "Technologies PRO", a new tariff offering for remote working with an expanded product line and added services such as personal manager, antivirus, cloud storage on Yandex. Disk and other, in addition to the core broadband service. I would also like to mention the launch of an innovative solution for monitoring solid domestic waste, which using video surveillance cameras and AI enables customers to assess the condition of waste collection sites, schedule and compliance with standards. The environmental protection services market is growing worldwide, and as the leading digital provider in the country, we realise the role we have to play, but also the significant opportunity in developing smart innovative products and solutions to help businesses, the government and households reduce their environmental impact."

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

"Our strong third quarter financial results reflect our plan for 2020 and we continue to deliver on our business targets. Despite the increased restrictions caused by the second wave of the pandemic, coupled with uncertainty surrounding macroeconomic dynamics, the considerable achievements made during the first three quarters, allows us to increase the forecast for key 2020 indicators. The management team therefore expects an increase in consolidated revenue of at least 9%, an increase in OIBDA of at least 9%; and СAPEX to stay within the range of 100-110 billion rubles excluding state programmes."

KEY OPERATING HIGHLIGHTS

Fixed-line business

Mobile business

1. The total number of Internet subscribers among households grew by 3% to 12.3 million in the third quarter of 2020 compared to the corresponding period of last year; ARPU was RUB 390.
2. The total number of B2B Internet and VPN subscribers increased by 6% year-on-year to 1.1 million; ARPU was RUB 3,231.
3. The number of pay-TV subscribers grew by 4% to 10.7 million households compared to the corresponding period of last year with average ARPU of RUB 245 across B2C;

• The number of IPTV subscribers increased by 8% to 5.9 million, and ARPU across B2C was RUB 298;

4. The number of active mobile Internet users grew by 25.5% year-on-year while mobile data traffic growth reached 55%; at the same time, cellular customer base churn decreased to 7.3%.
5. The number of local telephony subscribers decreased by 9% to 14.5 million.

KEY EVENTS RELATING TO 3Q 2020 AND AFTER THE END OF THE REPORTING PERIOD

Business news

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

• A new offer "Everywhere online" providing Tele2's clients with special subscription deals for the Wink video entertainment platform;
• A new remote working product line "Technologies PRO" launched to expand the services for Internet broadband customers with a number of products including dedicated customer support, antivirus, cloud storage on Yandex Disk and other;
• An innovative solution for monitoring of solid domestic waste was introduced to the market, enabling the inspection of waste collection sites, their operation schedules and compliance with standards, using video surveillance cameras and AI;
• A new MY.GAMES promotion with extra gaming bonuses for broadband clients;
• Further expansion of cloud gaming products: GFN.RU and GFN Cloud Games were introduced to subscribers in Ural and Siberia in high quality;
• Regular upgrades were made to the Wink digital platform, including:
  • Double-digit growth in the number of Wink users connected via more than one devices;
  • new voice control options for Wink with Marusya voice assistant and Kapsula smart column;
  •  Special terms for the "Watching together" shared viewing option introduced for multi-device watching, connecting people from anywhere in the country;
  • "Movie fan" subscription launched providing clients with 25% discount even on new films and episodes;
  • new addition for video-bloggers and expanded audiobooks catalogue;
• Expanded functionality and added options within the Rostelecom Key solution for:
  • Android users to enjoy expanded functionality within a newly launched video player;
  • clients to use smart access control systems for household facilities, allowing to control access doors remotely, create keys for gates, basements, lofts and other entrances;
  • new users to start using the service with better registration through mobile numbers only;
• As part of the further development of its convergent proposition:
  • Sales of new tariff plans Premium History, Technologies of benefits PRO and new Internet options for devices were launched;
  • Expanded geography of cloud gaming services;
• Within the Smart Home video surveillance services:
  • Sales of home CCTV cameras with cloud storage capacity up by 21%, contributing 28% to SmartHome ecosystem revenues;
  • personal account interface has been redesigned, allowing better client authorisation and registration process;
  • discounts now available to clients with 3, 6 or 12 months upfront payments;

• Rostelecom continues to grow its digital segment in 3Q 2020:

• As part of cybersecurity services:
  • cybersecurity revenues grew by more than 2.5 times;
  • new Incident Response Plan (IPR) service was launched, complemented with the upgraded version of Solar inRights;
  • Solar appScreener, app code analiser, has been upgraded;
  • Signed agreements to integrate the Identity Management System Solar inRights within JSC Kalashnikov Concern and Rosatom State Corporation;
  • The new version of Solar Dozor, a communication control and information leaks prevention system, has been introduced to the market;
  • New partner, Belorussian Axoft, has been added to Rostelecom's network, bringing their global IT services distribution capability;
  • A strategic partnership was signed with the Singapore regulator Infocomm Media Development Authority (IMDA) for inclusion of Solar appScreener in the state grant programme for IT SMEs to provide them with information security support;
• Rostelecom continues to grow its cloud services and data processing centres segments for B2B:
  • Data Centers revenue grew more than twofold;
  • Revenues from the Virtual PBX offering increased by 51%;
  • Virtual Data Centre services revenues increased by 105%;
  • Rostelecom launched a new datacentre unit in Moscow, with a total capacity of 100 racks.
  • The easternmost data centre opened in Sakhalin (with an initial capacity of 25 racks and a potential for expansion to 180 racks);
  • Rostelecom started the construction of the first Russian Tier IV data centre in Moscow with a 2,000 rack capacity.
• B2C fiber broadband revenues grew by 11%;
• Antivirus revenues up by 12%;
• Rostelecom continued to sign big contracts as well as develop  large-scale projects:
  • Rostelecom successfully provided video surveillance for the single election day;
  • Rostelecom successfully delivered video surveillance and webcast of the Unified State Exam (core and additional);
  • Rostelecom has agreed with VTB to provide a Single Corporate Telecommunication Network and WiFi in more than 1,500 branches;
  • Rostelecom completed setting up  WiFi network across 400 Gazprombank branches;
  • Signed agreement with the Ministry of Digital Development, Communications and Mass Media to connect its facilities to a Single Telecommunications Network and provide information security services;

• Highlights of the operator business segment:

• O2O[8] revenues grew by 19% in the third quarter of 2020;
• A Europe-Asia Leased Channel Access agreement signed with a Chinese partner for 100G;
• 80% of partner operators are now connected through personal accounts for better efficiency and transparency;

• Rostelecom's subsidiary Tele2's continues steady and dynamic growth:

• Digital cinema tariff options launched for clients as part of "Everywhere online" with full access to Wink video library;
• Unlimited access to Telegram is now provided to users;
• Tele2 launched a Health & lifestyle website;
• Tele2 started to provide double Internet traffic purchased on Market.Tele2;
• Tele 2 SIM-cards are now available in Magnit stores and in Wildberries;
• International 5G roaming was launched in Switzerland;
• Tele2 Russia, Rostelecom and Ericsson have demonstrated the potential of 5G to help health protection at CIPR, the Digital industry of industrial Russia Forum;
• Tele 2 launched an MVNO for a popular Russian blogger Azam Khodzhaev and GLONASS;
• The total client base of virtual operators with the Tele2 Russia network surpassed 4.2 million;
• The number of state-of-the-art Ericsson base stations installed has been increased to 25,000;
• Tele2 network is now available across the Altai Republic;
• Tele2 launched a mobile phone recycling function as part of the "Remelting" environmental project;
• Tele2 notched five years of operations in the Moscow region. Since the launch the number of 4G base stations increased by 23 times, while the construction are now exceeding the 2015 indictors by 1.5 times.

Tele2 has reaffirmed its rating of the best company in overall customer satisfaction[9].

Other news

• Rostelecom and YADRO have launched a new JV to support digital transformation with integrated PaaS and IaaS;
• Rostelecom acquired 51% in Fastech and 51% in Forkam - two digitization solutions providers for utility companies;
• Rostelecom gained interest in the share capital of the leading system integrator in IT security Elvis Plus;
• Rostelecom shareholders have approved the 2019 dividend payment of RUB 5 per share and the new Board of Directors at the AGM on 7 August 2020;
• Rostelecom announced a bond with a total nominal value of RUB 10 billion, at a coupon rate set at 6.3% per annum;
• Rostelecom has released a Special Report on the potential of 5G to transform national economy;
• Rostelecom supported the national student context Cyber Challenge.

OPERATING REVIEW

Revenue analysis

Revenue structure by services

Revenue structure by customer segments

In the third quarter of 2020, revenue increased by 13% to RUB 135 billion, compared to the third quarter of 2019, as a result of the following factors:

• a 62% increase in revenue from digital services, mainly due to the promotion of cloud and data centre services, larger sales of cyber security services and e-government solutions, webcast products, as well as the consolidation of DataLine;
• a 14% increase in revenue from mobile services due to a higher volume of mobile Internet data consumption and standard voice services;
• an 8% increase in revenue from broadband services due to a higher number of subscribers, as well as revenues from the Internet connection contracts;
• a 9% increase in wholesale revenues, namely a 19% increase in revenues from VPN and 9% - from infrastructure services for operators.

During the nine months of 2020, revenue increased by 12% to RUB 383.9 billion, year-on-year, as a result of the following factors:

• a 64% increase in revenue from digital services, mainly due to larger sales of e-government solutions, promotion of cloud and data centre services, Smart City / Smart Region projects and cyber security services, as well as the consolidation of DataLine in 2020;
• a 15% increase in revenue from mobile services due to a higher volume of mobile Internet data consumption and standard voice services;
• a 7% increase in revenue from broadband services due to a higher number of subscribers, as well as revenues from the Internet connection contracts;
• a 22% increase in revenue from other services, partly driven by sales of equipment as well as money transfer commissions and mobile communication payments.

Operating income analysis

Operating expenses structure

In the third quarter of 2020, operating expenses increased by 11% compared to the corresponding period of 2019 and amounted to RUB 111.9 billion, largely due to the following factors:

• a 14% increase (of RUB 3.7 bln) in depreciation, amortization and impairment losses, due to higher payments associated with new objects, impairment of intangible assets and lease;
• an 11% increase (of RUB 3.2 bln) in personnel costs, partly due to an increase in the number of employees within the digital business segments;
• an 11% increase (of RUB 2.4 bln) in interconnection charges, due to higher traffic caused by the pandemic and the massive transition to remote working and learning;
• a 27% increase (of RUB 2.2 billion) in materials, repairs and maintenance, utilities, mainly due to an increase in expenditure on personal protective equipment amid the pandemic, and the consolidation of expenses on electricity supplies for Rostelecom's recently acquired subsidiary DataLine, reflected in this line item.

During the nine months of 2020, operating expenses increased by 11% compared to the corresponding period of 2019 and amounted to RUB 323.3 billion, largely due to the following factors:

• a 13% increase (of RUB 11 bln) in personnel costs, mainly due to an increase in the number of employees within the digital business segments;
• a 14% increase (of RUB 10.5 bln) in depreciation, amortization and impairment losses, due to higher payments associated with new objects, the impairment of intangible assets and leases;
• a 9% increase (of RUB 5.6 bln) in interconnection charges, due to higher traffic caused by the pandemic and the massive transition to remote working and learning;
• a 17% increase (of RUB 4.1 billion) in materials, repairs and maintenance, utilities, mainly due to an increase in expenditure on personal protective equipment amid pandemic, and the consolidation of expenses on electricity supplies for DataLine subsidiary, reflected in this line item;
• a 5% increase (of RUB 2.6 bln) in other operating expenses, due to the implementation of Smart City projects, as well as the provision of equipment within B2B and B2G projects, higher agent payments for financial services in mobile commerce, recalculation of quality bonus payments.

Operating profit in the third quarter of 2020 increased by 23% year-on-year to RUB 23.1 billion and increased by 18% year-on-year to RUB 60.6 billion for the nine months of 2020.

OIBDA for the third quarter and nine months of 2020 increased by 17% year-on-year to RUB 53.7 billion and by 15% year-on-year to RUB 149.6 billion respectively. OIBDA dynamics were driven by revenue growth and the above-mentioned factors, affecting operating expenses. The OIBDA margin increased by 1.5 p.p. at 39.8% in the third quarter of 2020 and by 1.0 p.p. to 39% during the nine months of 2020 compared to the corresponding periods of 2019.

Net Income Analysis

In the third quarter of 2020, profit before tax increased by 38% to RUB 15.4 billion, and by 24% to RUB 35.5 billion in the nine months of 2020, compared to the corresponding periods in 2019. These dynamics in the third quarter and the nine months of 2020 were mainly influenced by higher operating profit and foreign exchange losses arising on the weakening of the exchange rate in 2020.

Income tax in the third quarter of 2020 was RUB 3.4 billion compared to RUB 2 billion in the third quarter of 2019. Income tax in the nine months of 2020 was RUB 8 billion compared to RUB 5.8 billion in the nine months of 2019. The income tax dynamics was partly driven by higher year-on-year expenditures, which are not deductible for tax purposes.

Net profit increased by 31% in the third quarter of 2020 to RUB 12 billion, compared to the corresponding period last year, and in the nine months of 2020 - by 21% to RUB 27.4 billion versus the nine months of 2019.

Financial review

Net operating cash flow in the third quarter of 2020 increased by 32% to RUB 45.9 billion, compared to the corresponding period of 2019. The increase in net operating cash flow in the third quarter of 2020 was mainly due to the increase in operating cash flow, as well as the contraction in the working capital driven by higher payables and other liabilities. These in turn were related to the reflection of deferred revenues from a number of B2G contracts. Net operating cash flow in the nine months of 2020 decreased by 5% to RUB 78.8 billion, compared to the corresponding period of 2019, which was due to the factors that influenced this dynamic in the first six months of 2020.

Cash outflow for investments in non-current assets, excluding state programmes, increased by 30% to RUB 24.3 billion (18% of revenue) in the third quarter of 2020. Including state programmes this indicator grew by 39% to RUB 30.2 billion (22.4% of revenue). During the nine months of 2020, cash outflow for investments in non-current assets, excluding state programmes, increased by 13% to RUB 71 billion (18.5% of revenue) while increasing by 11% to RUB 83.8 billion (21.8% of revenue), state programmes included.

Free cash flow in the third quarter of 2020 increased by 26% to RUB 19.5 billion compared to the third quarter of 2019. Free cash flow during the nine months of 2020 was RUB 4.7 billion compared to RUB 14.6 billion during the corresponding period of 2019.

As at September 30, 2020, the Group's total debt has increased by 23% compared to the beginning of the year and amounted to RUB 443.3 billion, partially driven by the fundraising achieved to help complete the consolidation of Tele2. 100% of the Group's total debt remained rouble-denominated at that date.

As at September 30, 2020, the Group's net debt increased by 23% compared to the beginning of the year and amounted to RUB 410 billion. The net debt /OIBDA ratio over the last 12 months stood at 2.2x at that date.

OTHER INFORMATION: CONFERENCE CALL

Rostelecom's management will hold a conference call and webcast today at 4.00 PM (Moscow), 2.00 PM (CET), 1.00 PM (UK) and 8.00 AM (NYT). To participate in the conference call, please dial:

UK/ International:  +44 (0) 330 336 9411

USA:    +1 323-794-2590

Russia:    +7 495 646 9190

Confirmation Code (ENG):  6177573

Confirmation Code (RUS):  1719269

A webcast of the conference call will only be available in English. To access the webcast please follow the link: https://www.webcast-eqs.com/register/rostelecom20201111/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/2020/3/.

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APPENDICES

1. Reconciliation of OIBDA;
2. Statement of Comprehensive Income for the nine months of 2020;
3. Statement of Cash Flows for the nine months of 2020;
4. Statement of Financial Position for the nine months of 2020.

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.

APPENDIX 2: Statement of Comprehensive Income for the nine months of 2020.

APPENDIX 3: Statement of Cash Flows for the nine months of 2020.

APPENDIX 4: Statement of Financial Position for the nine months of 2020.

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 broadband users stands at over 13.4 mln users, it has more than 10.7 mln pay-TV customers, over 5.9 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 44 mln subscribers and the industry-leading NPS, a customer satisfaction benchmark.

During the nine months of 2020, the Group generated RUB 383.9 bln of revenues, RUB 149.6 bln of OIBDA (39% of revenue) and RUB 27.4 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.

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.

[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] International financial reporting standards.

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

[5] Here and below, Net Debt is calculated as total debt less cash, cash equivalents and short-term investments (other financial assets).

[6] Average revenue per user

[7] Blended ARPU includes revenue from broadband, IPTV and digital cable TV

[8] Operator to Operator

[9] According to Romir holding data

[10] The amounts shown here do not correspond unaudited management interim condensed consolidated statement of profit or loss and comprehensive income for the nine-month period ended 30 September 2019 and reflect application of pooling of interest method applied to T2 RTK Holding LLC acquisition till 100% share

[11] The amounts shown here do not correspond unaudited management interim condensed consolidated statement of cash flows for the nine-month period ended 30 September 2019 and reflect application of pooling of interest method applied to T2 RTK Holding LLC acquisition till 100% share

[12] The amounts shown here do not correspond to the consolidated financial statements for the year ended 31 December 2019 and reflect adjustments made in connection with the completion the valuation of acquired net assets, with obtained control over them in 2019 and application of pooling of interest method applied to T2 RTK Holding LLC acquisition till 100% share