SHAPING

DIGITAL RUSSIA

Investor Presentation based on 9M 2017

2

Leading Provider of Integrated Telecommunications Services

Overview Key Financials FY 2016

(1) Ordinary shares. Treasury shares are represented by shares owned by Mobitel.

State stake53%

Treasury shares15%

Other shareholders

(free float)32%

Shareholder Structure (1)

State Property

Agency 48.7%

4.3%

#1

12.7

9.7

33.0

RUB

297.4bln

Revenue OIBDA FCF

RUB

96.8bln

RUB

13.3bln

player across most segments of telecom and

digital services

mln households passed by fibre – the largest

fixed line network in Russia

mln broadband subscribers with over 60%

connected by fibre

Exposure to high-growth potential markets such

as cloud services, TV services, data centre,

Geodata and Industrial Internet of Things

mln pay TV subscribers with near 50% using

IPTV

Exposure to Russian mobile data market via JV

with Tele2 Russia (#4 mobile operator in Russia)

3

25%

10%

7%

16%

21%

22%21%

7%

7%

5%33%

28%

Broadband

Pay TV

VPN

VAS&Clouds

Telephony

Other

Transformation to a Digital Service Provider by 2020as a Strategic Priority

CA

GR

20

15

-20

20

, %

Source: iKS Consulting, TMT-Consulting, Company estimates

Share in Rostelecom’s Revenue in 2015 & 2020, %

2015 2020

Market Size, RUB bln

Content &

Digital Services39% ~60%

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22%

8%

7%

6%29%

27%

2015 2020F2016

44%

4

9.0 9.2 9.3 9.4 9.5 9.7

201 206214

224 226 225

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

+5% YoY

3.9 4.04.2 4.4 4.6 4.7

269 278290

300 300 293

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

+16% YoY

6.7 6.9 7.1 7.3 7.5 7.6

330 324342 346 344 336

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

+10% YoY

11.311.5 11.6 11.7 11.8 11.9

351 345360 365 365 360

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

+4% YoY

Robust Growth of Subscriber Base and ARPU in B2C

Broadband B2C Subscribers (mln)

ARPU

incl. Fibre Subscribers (mln)

Pay TV Subscribers (mln)

incl. IPTV Subscribers (mln)

+4%YoY

+4%YoY

+9%YoY

+6%YoY F

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Revenue d

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5

38.4%31.7%

73.1%

10.1%

18.6%13.3%

Broadband Pay TV IPTV

Rostelecom #2

Development of Digital VAS & Strengthening of the

Market-leading Positions

Blended ARPU (2) (RUB)

MVNO with Tele2 Russia Subscriber Base (mln, B2C+B2B)

0.46

0.67

+45% QoQ

Market Position in 3Q 2017 (by revenue) (1)

(1) Source: TMT-Consulting estimates, Company data. Players #2 in terms of revenue shares are the following: ER-Telecom for Broadband, Tricolor TV for Pay TV and VimpelCom for IPTV.

(2) Blended ARPU includes revenue from broadband, IPTV and digital cable TV.

+1.3pp YoY

+1.2pp YoY

+2.6pp YoY

≈50%(2)

in market net

additions

≈70%(1)

in market net

additions

2.5xYoY sales growth of Antivirus

service

56% 65%

3Q163Q17

Share of Network Personal

Video Recorder (NPVR) users in

IPTV subscriber base

448

481

+7% YoY

2Q17 3Q17

3Q16 3Q17

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6

Strong Results in В2В/G Segment …

Revenue in B2B/G (RUB bln)

Broadband B2B/G Subscribers (mln) incl. Fibre Subscribers (mln)

25.227.0

+7% YoY500+

RUB mln

Additional revenue from “Smart City” projects in

3Q 2017

Agreements signed to develop and provide data

centres’ infrastructure and "Virtual Data Center"

service

+8p.p.

Share of fibre broadband subscribers

ARPU

3Q16 3Q17

0.740.75 0.75 0.76 0.76

0.75

2,082 2,0692,103

2,076 2,051

2,132

1,800

1,900

2,000

2,100

2,200

2,300

2,400

2,500

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

+1% YoY

0.220.24

0.260.28

0.29 0.31

3,749 3,511 3,380 3,045 3,086 2,885

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

+27% YoY

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… Driven by Federal B2G Clients and New Services

PerformanceRevenue from Broadband & VPN (RUB bln)Revenue from Federal B2G Clients (RUB bln)

Revenue from New Services (RUB bln)

0.4

1.1

3х YoY

9.2

9.4

+2% YoY

ТОP-6 New Services Revenue Growth

Top-6 = 80%

2.8

3.6

+27% YoY

Wi-Fi

Virtual Data Centre

New Telephony

Videocomfort

TV for Business

Call-centre

2.4х

1.6x

1.6x

3.4x

2.6x

2.6x

3Q16 3Q17 3Q16 3Q17

3Q16 3Q17

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8

E-Government

Ecology

112 Hot Line

E-learning

‘Safe Roads’

Healthcare

Energy efficiency

CCTV Safety

Platform

Emergency

Alert

systems

City Intellectual

Transportation

Platform

Rostelecom’s ‘Smart City’ Platform

7.2RUB bln

+68%

YoY2016

Revenue from

‘Smart City’ projects

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Revenue d

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92projects in

36regions

37 projects in

17regions

13projects in

12regions

229projects in

67regions

12projects in

9regions

Electronic

medical

history in

18 regions

Tele-

radiology

in 7 regions> 34 mln

subscribers

(2016)

9

Moscow

Novosibirsk

Kaliningrad

Nizhny Novgorod

Krasnodar

Sochi

Stavropol

Ryazan

Khabarovsk

Ekaterinburg

Chelyabinsk

KazanUfa

Saint-Petersburg

4,130

4,000

Roste

lecom

Data

Lin

e

Data

Pro

Lin

xte

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Se

lecte

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Sta

ck G

rou

p

I-T

eco

Data

Space

SD

N

CR

OC

Data CentresStrong Position Providing Basis for Solid Growth

(1) Source: CNews, Company data.

(2) Source: TMT-Consulting, Company estimates.

Rostelecom is the Largest Player…(1) … in the Fast Growing Market (2)

17% CAGR 2016-2020Under construction

– “Udomlya” project

11.913.8 15.0

2014 2015 2016E 2020F

Data Centres’ Portfolio

2,100

2,800

3,9004,130

2013 2014 2015 2016E

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2016

#1

14%share (2)

10

Cloud ServicesMassive Opportunity Ahead

12.015.8

22.6

28.0

48.3

2014 2015 2016 2017F 2020F

Cloud Services Market Forecast (RUB bln) (1)

(1) Source: SAP and Forrester.

21% CAGR 2016-2020

Cloud Services Market Structure in 2016 (1)

SaaS61%

IaaS35%

PaaS3%

Rostelecom’s Services

New Telephony Virtual Office

WEB-videoconference, etc.

CloudControl

NodeControl

Virtual Data Centre (VDC)

Virtual Desktop

Infrastructure (VDI), etc.

National Cloud Platform TIONIX Cloud Platform

(OpenStack based)Potential for IT-

infrastructure cost savings

30-70%

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Leading Content Aggregator & Media JV

Media JV with VGTRKUnique Content Proposition

Digital Television – leading pay TV content provider in

Russia with international presence

• Portfolio of 18 thematic TV channels

• Expansion to Latin America, India & China

• Strong results in 2016

220channels

Including:

• 70 channels in HD

• 3 exclusive channels, incl. Paramount

Channel

Packages

OTT video:

Interactive TV 2.0

• Basic includes HD channels

• Additional include Viasat Premium HD,

Amedia Premium, Your Ideal HD, PLUS

Football, Our Football, Your Cinema,

Adult, Your Premiere

Access to premium content, best titles and

free VOD library using internet

connection from any provider

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Revenue (RUB bln)

+23% YoYLeader

with 30%share in thematic

channels (1)

(1) Source: TNS TV Index & TV Index Plus, Share, November 2016, Total Aud.

1.82.2

2015 2016

• Direct contracts with all major Hollywood

studios

• Direct contracts with the key international

independent producers

12(1) Source: AC&M Consulting as of 4Q 2016.

(2) Source: Company data.

Mobile Joint Venture with Tele2 RussiaAccess to Growing Mobile Data Market

Unique corporate culture

based on strong cost

management

15%Share in Russian mobile

market (by subscribers),

player #4 in the total

market (1)

B2B

Upselling opportunities

that became available

after Moscow launch and

nation-wide network

rollout

65/48 Regions covered in total /

covered with 4G networks

MVNO /

Synergies

F2M convergence

opportunities through

MVNO and cooperation

on the B2O side

Player

#3In the 65 covered

regions (2)

120k/

3.4k

Total number of points

of sale / monobrand

retail shops

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Revenue d

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12% Revenue growth in 2016 103k Base stations

13

Launch of MVNO with Tele2 RussiaF2M Convergence on Track

Sep 15, 2016

First 5 MVNO regions

launched

Nov 16, 2016

MVNO launched

in 65 regions

MVNO subs, ths

Target 2020

up to 15% of fixed-line

subscriber base

Rationale

B2B/B2G clients to be upsold to mobile services

Increase in B2C customer loyalty

Creating opportunities for development of IIoT & M2M

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Revenue d

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0.22

0.46

0.67

1Q17 2Q17 3Q17

+45% QoQ

+107% QoQ

14

Operational Efficiency ImprovementContinued Personnel Optimisation Effect of Operational Efficiency Program

2.5

7.5

11.0

16.5

19.0

2.5

8.5

14.2

2014 2015 2016 2017F 2018F

Planned Achieved

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Revenue d

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Rostelecom’s Production System & Operations’ Management

Increase of personnel motivation and

satisfaction

Improvement of customer experience

Ability to rapidly respond to market

changes

Efficiency and profitability increase

Pri

ncip

les

20-30%

Personnel productivity

increase

5-10%

Operational expenses

reduction

Targ

ets

Time to market of new servicesBroadband / pay TV NPS

35 / 38 3 months

173.0164.6

158.9149.9

142.5134.9

1.7 1.81.9 2.0 2.1 2.2

2012 2013 2014 2015 2016 9M17

Average number of employees, ths

Revenue per employee LTM, RUB mln

-5%

15

Real Estate Portfolio Optimisation to Unlock Value

Portfolio Breakdown in 2016 (sq.m mln)

Total

Regional

capitals

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Revenue d

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>2sq.m mln

ready for

sale

Real Estate Optimisation on Track in 2016

RUB 0.5 bln

OPEX savings in 2016

RUB 3.3 bln

income from sale of Real Estate

(ex. fund with Sberbank)

Real estate sub-fund with Sberbank

created with RUB 4.0 bln of proceeds

≈300 ths sq.m

sold in 2016

0.6

8.8

3.0RUB 3.1 bln

from rent of Real Estate

16

Largest Network with Growing Fibre Penetration

Growth in Network Capacity

(IP / MPLS, Tb/s)

Expansion of Fibre Coverage

(mln households)

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Submarine Cable

Magadan-

Sakhalin-Kamchatka

Northern

Optical

Stream

Bridging Digital Divide

3.5

7.4

10.6

12.313.7

2012 2013 2014 2015 2016

71.252.9 53.8 59.5 56.6

24.1%

18.2% 18.0%20.0% 19.0%

2012 2013 2014 2015 2016

Capital Expenditures (RUB bln) & CAPEX/

Revenue (%) (1)

(1) Excluding BDD project in 2015-2016 and mobile in 2012-2014.

2.85.6

6.6

4.5 1.5 0.8

13.9

19.5

26.1

30.7 32.2 33.0

2012 2013 2014 2015 2016 9M17

Passed during the period

17

53Dense area

PON/FTTB

Total HH in Russia

Rural area

sponsored under BDD

project

Fibre + Public WiFi

Balanced Approach to Last-Mile Upgrade

We use different

last-mile solutions

to meet our

customer needs

and ensure

efficiency of our

investments.

Rural area

xDSL + wireless

46

Total HH Rostelecom

33>4 F

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Government Sponsored

“Bridging the Digital Divide” ProjectOperational Highlights

Financial Highlights*

* Targets are based on the agreement signed in 2014.

Note: Operating income is state-funded and is reported under “other operating income”.

1,5893,909

14,000

2034

160

2015 2016 Target

Settlements Fibre optic, ths km

500 ths

households

passed

13.3 10.4

168

3.2 5.2

≈70 ≈70

2015 2016 10-year total

Operating Income Cash CAPEX OPEX

A Nation Wide Project to Provide High Speed Internet

Access to Rural Population….

…with Significant Upside Potential for Rostelecom

Overview Envisaged Influence

Upselling households for personal BB access

and other VAS (on a commercial basis)

Opportunity to accelerate the upgrade of existing

networks from copper to fibre and expand its

footprint through covering nearby towns

Opportunity to accelerate the upgrade of existing

networks from copper to fibre reducing the

maintenance costs

Operational

Efficiency

Revenue

Network

Coverage

Revenue

Rostelecom is to construct fibre-optics and organize and

maintain collective Internet access points

Strong

government

commitment

Nation wide scale

Rostelecom

to own the

networks

Upside

potential

NPV positive,

IRR > WACC

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19

Increasing Shareholder Remuneration through

Improved Dividend Policy 2016-2018

≥ 75% 45RUB bln

of Free Cash Flow In total

for 3 years

&Progressive

YoYBut not

less than

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20

Enhanced Long-term Incentive Programme 2017-2019

Up to 1,000 employees to participate in the programme

3 annual cycles:

2017, 2018, 2019

Ordinary shares

dedicated to the

programme:

up to 6.0%

Additional shares are vested

by the Company 6 months

after participant’s investments

under the programme

Key performance indicators:

• Free Cash Flow (FCF)

• Net Profit

• Return on Invested Capital (ROIC)

Entitlement for additional share-based remuneration

depends on participant’s position, invested funds

and individual performance

Senior management can participate

in the 2nd & 3rd cycles if maintaining

≥50% of additional shares granted

under previous cycles

Co-financing principle (share matching plan, SMP)

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RUB bln FY 2015 FY 2016 YoY 9M 2016 9M 2017 YoY

Revenue 297.4 297.4 0.03% 217.0 221.2 1.9%

Content & Digital

Services revenue117.2 129.4 10.5% 94.2 103.7 10.2%

OIBDA 100.8 96.8 -4.0% 72.4 71.2 -1.7%

OIBDA margin 33.9% 32.5% -1.4 pp 33.4% 32.2% -1.2 pp

Net Profit 14.4 12.2 -14.9% 8.7 9.9 14.1%

Free Cash Flow 22.0 13.3 -39.4% -2.3 3.1 na

CAPEX 62.7 61.9 -1.4% 46.8 42.3 -9.6%

CAPEX / Sales 21.1% 20.8% -0.3 pp 21.6% 19.1% -2.4 pp

CAPEX / Sales

excl. BDD20.0% 19.0% -1.0 pp 19.7% 18.0% -1.7 pp

Key Financial Highlights FY 2016 & 9M 2017

+4%

+21%

+11%

Revenue growth in 3Q17

FCF growth in 3Q17

Growth in revenue from Content

& Digital services in 3Q17

Revenue Share of

Content & Digital Services

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Revenue d

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44% 47%

3Q16

3Q17

22

72.81.1 0.9

1.1 0.5-2.2

0.01.5 75.6

3Q 2016 Broadband TV VAS &Cloud

services

VPN Telephony Wholesale(excl. VPN)

Other 3Q 2017

23%

9%

8%

7%25%

18%

9%

Broadband Internet

TV services

VPN

VAS & Cloudservices

Fixed telephony

Wholesale services(ex. VPN)

Other

23%

8%

7%

6%29%

19%

8%

RUB bln 3Q 2016 3Q 2017 YoY 9М 2016 9М 2017 YoY

Content & Digital

Revenue32.3 35.7 10.8% 94.2 103.7 10.2%

Broadband 16.5 17.6 6.5% 49.5 52.7 6.5%

TV 6.0 6.8 14.3% 17.3 20.3 17.1%

VAS & Cloud

services4.5 5.6 23.6% 11.8 14.2 19.5%

VPN 5.3 5.8 9.4% 15.5 16.6 6.9%

Fixed Telephony 21.3 19.1 -10.2% 66.4 59.3 -10.7%

Wholesale Services

(ex. VPN)13.9 13.9 0.1% 41.6 40.8 -2.0%

Other 5.4 6.9 28.2% 14.9 17.5 17.1%

Total Revenue 72.8 75.6 3.9% 217.0 221.2 1.9%

Continuing Growth of All Key Services as a Foundation

for 4% Revenue Growth3Q & 9M 2017 Revenue Drivers Revenue Breakdown (%)

Content & Digital Services share

3Q 20173Q 2016

44% 47%

Revenue Dynamics (RUB bln)

+RUB 2.8 bln

+3.9%

* Content & Digital services = Broadband + TV + VAS & Cloud services + VPN

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OIBDA Dynamics (RUB bln)

Revenue & OIBDA Dynamics in 3Q 2017

Payroll (excl. ESOP) declined due to ongoing personnel

optimization

Interconnection charges increased along with the growth in

corresponding revenue and higher content expenditures due to

a growing subscriber base

Increase in other operating expenses mainly caused by

additional expenses for “Smart City” and “State Automated

System “Justice” projects

OIBDA (RUB bln) & OIBDA margin (%)

Revenue (RUB bln)

217.0 221.2

9M16 9M17

+1.9% YoY

72.4 71.2

33.4%32.2%

9M16 9M17

71.8 72.880.4

70.4 75.2 75.6

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

+3.9% YoY

22.7 25.0 24.421.6

24.6 25.0

31.6%34.4%

30.3% 30.6%32.7% 33.1%

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

25.0 2.8

0.6-1.4 0.2 0.3 -0.2 0.5

-2.9 25.0

3Q

2016

Re

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Payro

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3Q

2017

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24

Net Income Dynamics (RUB bln)

Net Income & FCF Dynamics in 3Q 2017

Allowance for a new long-term incentive programme (ESOP)

was recorded in 3Q 2017 for 1Q-3Q 2017

Depreciation charges increased mainly due to commissioning of

new objects in the end of 2016

Other investing and financial gains increased as a result of

revaluation of financial instruments

Decrease in losses from associates is mainly caused by better

financial result of the JV with Tele2 Russia

Net Income (RUB bln) & Net Income margin (%)

8.79.9

3.2%

4.1%

9M16 9M17

Free Cash Flow (RUB bln)

1.6

4.1 3.6 3.2 2.83.9

2.2%

5.6%

4.5% 4.5%3.8%

5.2%

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

-5.7

5.9

15.6

-2.3 -1.6

7.1

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

4.1 0.0

-1.4

-1.2 0.8

0.3 0.8

-0.2 0.73.9

3Q

2016

OIB

DA

ES

OP

De

pre

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tion

Lo

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Incom

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fro

massocia

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Fin

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costs

Oth

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investing a

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fin

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/(lo

ss)

FX

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Tax

3Q

2017

-2.3

3.1

9M16 9M17

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Revenue d

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25

20.6

42.6

16.9

1.2

25.2

93.5

4Q 2017 2018 2019 2020 2021 2022 andonwards

Increasing Efficiency of Capital Expenditures & Debt

PortfolioCAPEX (RUB bln) & CAPEX / Revenue (%) Total & Net Debt (RUB bln)

by Maturity (excl. %), RUB bln

Total Debt Structure

by Type by Currency

4.1 2.4

46.842.3

21.6%19.1%

19.7%18.0%

9M16 9M17

182.5 190.1 177.5 180.0 185.5 191.2

192.7 200.4187.1 189.8 200.1 201.4

1.91.9

1.81.9 1.9

2.0

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Net Debt Total Debt Net Debt / OIBDA

0.8 0.6 1.1 0.5 0.8 1.1

14.8 13.015.1

17.7

12.5 12.1

20.6%

17.9% 18.7%

25.1%

16.6% 16.0%

17.1%14.6%

2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Capex

78%

19%

3%

Loans Bonds Other

99.9%

0.1%

RUB Other

Fin

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Effic

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Revenue d

rivers

26

2017 Outlook

Revenue Up to 1.5% growth

CAPEX /

Sales

(excl. BDD)

≈ 18.5%

OIBDA Up to 1% growth

By providing this outlook, we reserve the right to revise or update it at any subsequent period in case of events which, in our

opinion, can increase uncertainty, including but not limited to regulatory decisions, currency devaluation, consumer spending

contraction, budget cuts, or any other macroeconomic events and decisions which can affect the Company’s actual results.

Upgraded

Reiterated

Reiterated

Fin

ancia

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hare

hold

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Capita

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Effic

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Revenue d

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Detailed

Performance

Attachment

28

Attachment

P&L Statement

RUB bln 1Q 2017 2Q 2017 3Q 2017Growth

YoY - 3Q

Growth

YoY – 9M1Q 2016 2Q 2016 3Q 2016 4Q 2016 2016

Revenue 70.436 75.166 75.614 3.9% 1.9% 72.464 71.794 72.781 80.407 297.446

Operating expenses (62.343) (63.862) (66.438) 9.0% 2.2% (63.962) (63.523) (60.966) (69.159) (257.610)

Wages, salaries, other benefits and payroll taxes (23.923) (22.026) (22.504) 3.5% 0.0% (23.927) (22.797) (21.750) (21.866) (90.340)

including stock option program (0.006) 0.436 (1.836) 301.8% -10.2% (0.537) (0.571) (0.457) 0.218 (1.347)

Depreciation, amortization and impairment losses (13.470) (13.731) (13.983) 9.5% -2.5% (15.632) (13.849) (12.766) (13.342) (55.589)

Interconnection сharges (10.775) (13.547) (13.671) 11.7% 3.5% (12.811) (11.652) (12.241) (15.457) (52.161)

Materials, utilities, repair and maintenance (6.183) (5.682) (5.795) -3.4% 2.1% (5.885) (5.421) (5.998) (7.613) (24.917)

Gain/(Loss) on sale and disposal of PPE and intangible assets 0.154 0.642 0.685 70.3% 8.7% 0.498 0.463 0.402 3.193 4.556

Bad debt expense (0.656) (0.841) (1.121) 19.9% -2.1% (0.456) (1.284) (0.935) (0.100) (2.775)

Other operating income 3.132 3.233 3.223 17.6% -6.6% 4.936 2.589 2.741 2.682 12.948

Other operating expense (10.622) (11.911) (13.271) 27.4% 9.6% (10.685) (11.572) (10.419) (16.656) (49.332)

Operating profit 8.093 11.304 9.176 -22.3% -0.1% 8.502 8.271 11.815 11.248 39.836

Operating Profit margin 11.5% 15.0% 12.1% 11.7% 11.5% 16.2% 14.0% 13.4%

OIBDA 21.569 24.599 24.995 -0.2% -1.7% 24.670 22.692 25.038 24.372 96.772

OIBDA Margin 30.6% 32.7% 33.1% 34.0% 31.6% 34.4% 30.3% 32.5%

Loss/(Income) from equity accounted investees (1.024) (0.715) (0.660) -56.1% -52.1% (1.918) (1.583) (1.503) (2.292) (7.296)

Finance costs (3.666) (5.802) (4.067) -6.3% 6.4% (4.107) (4.275) (4.342) (4.451) (17.175)

Other Investing and financial gain/(loss) 0.481 (0.110) 0.703 -628.4% 67.8% 0.551 0.222 (0.133) 0.421 1.061

Foreign exchange gain/(loss), net 0.123 (0.082) (0.045) -128.6% -100.7% 0.741 (0.353) 0.159 (0.032) 0.515

Profit before income tax 4.007 4.595 5.107 -14.8% 13.8% 3.769 2.282 5.996 4.894 16.941

Income tax expense (0.857) (1.769) (1.202) -37.9% 13.1% (0.767) (0.681) (1.936) (1.308) (4.692)

Net profit 3.150 2.826 3.905 -3.8% 14.1% 3.002 1.601 4.060 3.586 12.249

Net profit margin 4.5% 3.8% 5.2% 4.1% 2.2% 5.6% 4.5% 4.1%

29

Attachment

Revenue StructureRUB bln 1Q 2017 2Q 2017 3Q 2017

Growth

YoY - 3Q

Growth

YoY – 9M1Q 2016 2Q 2016 3Q 2016 4Q 2016 2016

By services:

Broadband Internet 17.528 17.610 17.571 6.5% 6.5% 16.442 16.562 16.497 17.270 66.771

TV services 6.642 6.809 6.828 14.3% 17.1% 5.613 5.728 5.972 6.287 23.599

Fixed telephony 20.399 19.763 19.132 -10.2% -10.7% 22.996 22.074 21.310 21.201 87.314

Wholesale services 17.363 20.308 19.649 2.6% 0.4% 19.747 18.207 19.143 21.912 79.010

Rent of channels 2.403 2.367 2.302 -10.3% -12.2% 2.844 2.646 2.566 2.482 10.538

Interconnect and traffic transit 6.743 8.958 8.418 3.7% -0.5% 8.853 7.272 8.122 10.856 35.102

VPN 5.073 5.707 5.785 9.4% 6.9% 4.995 5.207 5.290 5.331 20.823

Rent & maintenance of telecommunication infrastructure 3.144 3.277 3.144 -0.7% 2.8% 3.055 3.083 3.166 3.243 12.546

VAS & Clouds 3.643 4.957 5.558 23.6% 19.5% 3.100 4.249 4.497 6.400 18.245

Other telecommunication services 3.402 3.736 4.299 29.3% 20.0% 3.035 3.173 3.324 4.941 14.741

Other non-telecommunication services 1.460 1.982 2.577 26.4% 12.1% 1.531 1.801 2.038 2.397 7.767

Broadband Internet 24.9% 23.4% 23.2% 22.7% 23.1% 22.7% 21.5% 22.4%

TV services 9.4% 9.1% 9.0% 7.7% 8.0% 8.2% 7.8% 7.9%

Fixed telephony 29.0% 26.3% 25.3% 31.7% 30.7% 29.3% 26.4% 29.4%

Wholesale services 24.7% 27.0% 26.0% 27.3% 25.4% 26.3% 27.3% 26.6%

Rent of channels 3.4% 3.1% 3.0% 3.9% 3.7% 3.5% 3.1% 3.5%

Interconnect and traffic transit 9.6% 11.9% 11.1% 12.2% 10.1% 11.2% 13.5% 11.8%

VPN 7.2% 7.6% 7.7% 6.9% 7.3% 7.3% 6.6% 7.0%

Rent & maintenance of telecommunication infrastructure 4.5% 4.4% 4.2% 4.2% 4.3% 4.3% 4.0% 4.2%

VAS & Clouds 5.2% 6.6% 7.4% 4.3% 5.9% 6.2% 8.0% 6.1%

Other telecommunication services 4.8% 5.0% 5.7% 4.2% 4.4% 4.6% 6.1% 5.0%

Other non-telecommunication services 2.1% 2.6% 3.4% 2.1% 2.5% 2.8% 3.0% 2.6%

By management units:

B2C 33.967 33.756 33.387 1.9% 1.7% 33.645 33.049 32.749 34.474 133.917

B2B/B2G 23.352 25.897 26.971 6.9% 3.6% 23.368 24.961 25.235 28.631 102.195

B2O 11.990 14.343 13.947 3.1% -0.9% 14.452 12.663 13.532 16.203 56.851

Other 1.128 1.169 1.310 3.5% 6.6% 0.998 1.121 1.265 1.099 4.483

B2C 48.2% 44.9% 44.2% 46.4% 46.0% 45.0% 42.9% 45.0%

B2B/B2G 33.2% 34.5% 35.7% 32.2% 34.8% 34.7% 35.6% 34.4%

B2O 17.0% 19.1% 18.4% 19.9% 17.6% 18.6% 20.2% 19.1%

Other 1.6% 1.6% 1.7% 1.4% 1.6% 1.7% 1.4% 1.5%Note: Fixed telephony and other telecommunication services revenues for 1Q-3Q 2016 have been restated due to relocation between the revenue lines.

30

Attachment

Balance SheetRUB bln 3/31/2017 6/30/2017 9/30/2017 3/31/2016 6/30/2016 9/30/2016 12/31/2016

Non-current assets

Property, plant and equipment 341.177 339.034 338.056 333.579 331.771 334.580 343.667

Investment property 0.184 0.176 0.161 0.103 0.122 0.099 0.181

Goodwill and other intangible assets 60.479 59.950 59.312 59.752 61.609 60.730 61.209

Trade and other accounts receivable 7.022 8.966 9.293 4.969 5.334 5.435 7.053

Investment in associates 67.327 66.612 65.978 73.347 71.728 70.205 68.352

Other investments 1.178 1.415 1.443 0.754 0.805 0.845 0.797

Other non-current assets 5.707 6.027 5.609 4.451 4.297 5.006 5.551

Total non-current assets 483.074 482.180 479.852 476.954 475.666 476.900 486.810

Current assets

Inventories 6.314 6.680 6.788 3.934 4.138 4.709 6.444

Trade and other accounts receivable 50.013 51.470 52.815 48.856 48.671 50.338 45.884

Prepayments 2.683 2.337 2.875 2.328 2.441 2.140 2.166

Prepaid income tax 1.654 0.472 0.478 5.203 4.899 2.870 1.957

Other investments 3.962 8.214 8.929 4.791 6.553 5.913 5.367

Cash & cash equivalents 5.828 6.388 1.343 5.144 3.640 4.427 4.257

Other current assets 2.428 2.262 2.620 3.729 2.155 2.063 2.151

Total current assets 72.882 77.823 75.848 73.986 72.496 72.460 68.226

Assets held for sale 0.733 0.859 0.921 1.647 1.734 1.727 0.646

TOTAL ASSETS 556.689 560.862 556.621 552.587 549.895 551.087 555.682

Equity

Share capital 0.093 0.093 0.093 0.093 0.093 0.093 0.093

Additional paid in capital 0.090 0.090 0.090 0.090 0.090 0.090 0.090

Treasury shares (67.034) (64.602) (65.556) (68.669) (67.031) (66.932) (67.034)

Retained earnings and other reserves 313.912 300.716 306.202 317.329 304.176 308.238 311.167

Non-controlling interest 4.430 3.138 3.253 4.036 4.102 4.246 4.317

Total equity 251.491 239.435 244.082 252.879 241.430 245.735 248.633

Non-current liabilities

Loans and borrowings 120.261 140.724 145.131 141.205 134.452 140.543 124.510

Employee benefits 4.975 5.152 5.049 5.020 5.380 5.522 5.217

Deferred tax liabilities 37.701 37.972 38.766 33.329 32.486 33.175 36.165

Other non-current liabilities 7.538 7.449 7.569 7.876 10.025 10.926 7.097

Total non-current liabilities 170.475 191.297 196.515 187.429 182.344 190.166 172.989

Current liabilities

Loans and borrowings 69.534 59.341 56.293 45.262 58.273 59.868 62.595

Accounts payable 58.384 64.041 53.099 58.483 60.800 48.368 64.072

Other current liabilities 6.805 6.748 6.632 8.534 7.050 6.950 7.393

Total current liabilities 134.723 130.130 116.024 112.279 126.123 115.186 134.060

TOTAL EQUITY AND LIABILITIES 556.689 560.862 556.621 552.588 549.897 551.087 555.682

Net debt 180.005 185.463 191.152 176.532 182.533 190.071 177.481

Net debt / OIBDA LTM 1.9х 1.9х 2.0х 1.7х 1.9х 1.9х 1.8х

Gross debt 189.795 200.065 201.424 186.468 192.725 200.411 187.105

31

Attachment

Cash Flow StatementRUB bln 1Q 2017 1H 2017 9M 2017 1Q 2016 1H 2016 9M 2016 2016

Cash flows from operating activities

Profit before income tax 4.007 8.602 13.709 3.769 6.051 12.047 16.941

Adjustments to reconcile profit before taх to cash generated from operations:

Depreciation, amortization and impairment losses 13.470 27.201 41.184 15.632 29.481 42.247 55.589

(Gain)/Loss on sale and disposal of PPE and intangible assets (0.154) (0.796) (1.481) (0.498) (0.961) (1.363) (4.556)

Bad debt expense 0.656 1.497 2.618 0.456 1.740 2.675 2.775

(Income)/Loss from equity accounted investees 1.024 1.739 2.399 1.918 3.501 5.004 7.296

Finance costs excluding finance costs on pension and other long-term social liabilities 3.666 9.405 13.441 3.985 8.141 12.366 16.699

Other Investing and financial (gain)/loss (0.481) (0.371) (1.074) (0.551) (0.773) (0.640) (1.061)

Foreign exchange (gain)/loss, net (0.123) (0.041) 0.004 (0.741) (0.388) (0.547) (0.515)

Share-based payment expenses (0.004) (0.382) 1.381 0.406 0.838 1.184 1.019

Changes in net working capital: (3.218) (13.596) (15.465) (1.496) (10.748) (13.819) (8.608)

(Increase) / decrease in accounts receivable (4.662) (9.545) (12.231) (6.018) (6.862) (9.258) (3.941)

(Decrease) / increase in employee benefits (0.242) (0.065) (0.169) (0.001) (0.013) 0.128 (0.561)

(Increase) / decrease in inventories 0.130 (0.236) (0.345) 0.116 (0.045) (0.615) (2.351)

(Decrease) / increase in accounts payable, provisions and accrued expenses 3.094 (2.544) (0.441) 5.886 (1.560) (2.142) 1.376

(Decrease) / increase in other assets and liabilities (1.538) (1.206) (2.279) (1.479) (2.268) (1.932) (3.131)

Cash generated from operations 18.843 33.257 56.716 22.879 36.882 59.154 85.579

Interest paid (4.823) (8.624) (13.700) (4.764) (9.333) (14.383) (18.410)

Income tax refund 1.293 1.514 1.771 0.000 0.234 1.395 4.391

Income tax paid (0.414) (1.355) (1.975) (2.212) (3.624) (3.822) (4.383)

Net cash provided by operating activities 14.899 24.792 42.812 15.903 24.159 42.344 67.177

Cash flows from investing activities

Purchase of PPE and intangible assets (17.714) (30.165) (42.290) (18.964) (33.768) (46.797) (61.857)

Proceeds from sale of PPE and intangible assets 0.506 1.420 2.580 0.635 1.438 2.133 7.978

Acquisition of financial assets (1.484) (7.264) (9.575) (2.767) (4.560) (5.737) (9.736)

Proceeds from disposals of financial assets 2.477 3.919 5.423 3.251 4.678 6.376 10.831

Interest received 0.097 0.335 0.491 0.444 0.628 0.827 1.029

Dividends received 0.001 0.001 0.006 0.002 0.020 0.022

Purchase of subsidiaries, net of cash acquired (0.064) (0.064) (0.064) 0.000 (2.438) (2.438) (2.438)

Acquisition of equity accounted investees (0.030) (0.778) (0.778) (0.778) (2.778)

Proceeds from disposals of equity accounted investees 0.139 0.347 (0.001) (0.001) (0.001) (0.001)

Net cash used in investing activities (16.181) (31.679) (43.112) (18.180) (34.799) (46.395) (56.950)

Cash flows from financing activities

Sale of treasury shares 0.001 0.008 0.008 0.157

Purchase of treasury shares (0.981) (0.314)

Proceeds from bank and corporate loans 112.899 269.120 415.828 160.301 324.543 496.127 655.190

Repayment of bank and corporate loans (109.714) (258.150) (391.919) (156.909) (313.984) (492.822) (665.936)

Proceeds from bonds 10.000 10.000 15.000 15.000

Repayment of bonds (9.285) (20.418) (2.734) (2.734) (2.734) (2.734)

Repayment of vendor financing payable (0.002) (0.005) (0.007) (0.002) (0.005) (0.007) (0.009)

Proceeds from / (repayment of) other non-current financing liabilities (0.002) (0.005) (0.001)

Repayment of finance lease liabilities (0.012) (0.061) (0.089) (0.001) (0.073) (0.116) (0.160)

Acquisition of non-controlling interest (2.255) (2.255)

Dividends paid to shareholders of the Group (12.195) (13.295) (13.295)

Dividends paid to non-controlling shareholders of subsidiaries (0.183) (0.012) (0.045) (0.248) (0.258)

Options settlement repayments (0.103) (0.209) (0.209) (0.125) (0.231) (0.231) (0.319)

Net cash used in financing activities 3.068 9.153 (2.432) 0.518 7.479 1.682 (12.679)

Net (decrease)/increase in cash and cash equivalents 1.571 2.131 (2.914) (2.021) (3.525) (2.738) (2.908)

Effect of exchange rate changes on cash and cash equivalents (0.215) (0.135) (0.182) (0.261) (0.364) (0.369) (0.456)

Cash and cash equivalents at beginning of year 4.256 4.256 4.256 7.164 7.164 7.164 7.164

Cash and cash equivalents at the end of period 5.827 6.387 1.342 5.143 3.639 4.426 4.256

FCF (2.309) (3.953) 3.102 (2.427) (8.171) (2.320) 13.298

32

Attachment

Operational Data1Q 2017 2Q 2017 3Q 2017 1Q 2016 2Q 2016 3Q 2016 4Q 2016 2016 1Q 17/16 2Q 17/16 3Q 17/16

SUBSCRIBERS, MLN

Local telephony 20.3 19.9 19.5 21.8 21.4 21.0 20.6 20.6 -7.1% -7.0% -7.2%

B2C 16.8 16.5 16.1 18.2 17.8 17.5 17.1 17.1 -7.7% -7.6% -7.7%

B2B 3.5 3.4 3.4 3.6 3.6 3.5 3.5 3.5 -4.0% -3.9% -5.0%

Broadband by client type 12.5 12.6 12.7 11.9 12.0 12.3 12.4 12.4 5.0% 4.6% 3.4%

B2C 11.7 11.8 11.9 11.2 11.3 11.5 11.6 11.6 5.0% 4.7% 3.6%

B2B 0.8 0.8 0.8 0.7 0.7 0.7 0.8 0.8 3.9% 3.6% 0.8%

Broadband by technology 12.5 12.6 12.7 11.9 12.0 12.3 12.4 12.4 5.0% 4.6% 3.4%

xDSL 4.9 4.8 4.8 5.2 5.2 5.1 5.0 5.0 -6.5% -6.1% -6.2%

FTTx 7.6 7.7 7.9 6.7 6.9 7.2 7.4 7.4 14.0% 12.7% 10.2%

xDSL 39% 38% 38% 44% 43% 41% 40% 40%

FTTx 61% 62% 62% 56% 57% 59% 60% 60%

Pay TV 9.4 9.5 9.7 8.9 9.0 9.2 9.3 9.3 6.4% 5.7% 5.4%

IPTV 4.4 4.6 4.7 3.7 3.9 4.0 4.2 4.2 20.4% 18.1% 16.4%

Cable TV 5.0 5.0 5.0 5.2 5.2 5.1 5.1 5.1 -3.4% -3.5% -3.3%

IPTV 47% 48% 49% 41% 43% 44% 46% 46%

Cable TV 53% 52% 51% 59% 57% 56% 54% 54%

Mobile (MVNO with Tele2) 0.2 0.5 0.7

ARPU, RUB

Broadband

B2C 365 365 360 354 351 345 360 352 3.2% 3.9% 4.2%

B2B 2,076 2,051 2,132 2,114 2,082 2,069 2,103 2,092 -1.8% -1.5% 3.0%

incl. Broadband FTTx

B2C 346 344 336 333 330 324 342 332 3.8% 4.0% 4.0%

B2B 3,045 3,086 2,885 3,821 3,749 3,511 3,380 3,598 -20.3% -17.7% -17.8%

Local telephony

B2C 251 249 243 267 257 250 255 257 -6.2% -3.2% -2.6%

B2B 611 637 637 636 624 619 640 630 -3.9% 2.1% 2.9%

Pay TV (B2C) 224 226 225 201 201 206 214 206 11.4% 12.4% 9.0%

incl. IPTV 300 300 293 273 269 278 290 278 9.8% 11.6% 5.7%

Note: Subscriber base and ARPUs for 2016 have been restated due to changes in methodology.

33

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CONTACTS

34