Updated Strategy

By the end of 2013, Rostelecom`s Board of Directors had approved the Company’s renewed strategy to 2018. The strategy was proposed following the appointment of Mr Kalugin as CEO in March 2013, and the further enhancement of Rostelecom’s management team with highly successful professionals of vast experience in telecommunications, marketing and finance.

A key component of the updated strategy was to split Company’s business into two parts - fixed operations and mobile segment, and develop each separately.

In terms of the development of Rostelecom’s operations, the Company`s priority is currently its fixed operations. Management is sharpening its focus on its core fixed segment so as to reinforce Rostelecom’s leadership position in the fixed market, and capitalize on the largest backbone and last mile infrastructure in the marketplace and best in class expertise in Russia.

It was determined that the Company’s mobile business should pursue a different strategy, namely enter into a joint venture (JV) partnership with a leading mobile player in the Russian market. The JV path that Rostelecom has selected for its cellular assets will maximize Rostelecom’s ability to realize value from its existing cellular assets. Tele2 Russia, who became the Company's partner in JV, is strategically the best fit for the Company as the two companies can benefit from coverage that is complementary. When Rostelecom`s attractive spectrum portfolio and Tele2`s proven track record in establishing strong competitive position in the market place are combined, thanks to Tele 2’s focus on cost management, the new JV will be a major force in the mobile segment.