OREANDA-NEWS. Open Joint Stock Company "MegaFon" ("MegaFon", or the "Company") (LSE: MFON), a leading Russian integrated telecommunications operator, announces its unaudited consolidated financial results1 for the third quarter ended 30 September 2014.

Key highlights of the Third Quarter 2014

• Consolidated revenue grew by 4.5% y-o-y to RUB 81,066 million

• OIBDA increased by 5.3% y-o-y to RUB 37,263 million

• OIBDA margin grew to 46.0% versus 45.6% in Q3 2013

• Net Profit decreased by 16.5% y-o-y to RUB 12,792 million

• CAPEX increased by 31.4% y-o-y to RUB 14,268 million

• Free Cash Flow amounted to RUB 25,415 million

• Net Debt as of 30 September 2014 was RUB 140,283 million

• The number of mobile subscribers grew by 4.7% y-o-y to 71.5 million as of

30 September 2014

Key highlights of the Nine Months ended 30 September 2014

• Consolidated revenue grew by 6.9% y-o-y to RUB 232,608 million

• OIBDA increased by 2% y-o-y to RUB 104,064 million

• OIBDA margin decreased to 44.7% versus 46.9% in 2013

• Net Profit decreased by 18.3% y-o-y to RUB 33,906 million

• CAPEX totaled RUB 36,017 million

• Free Cash Flow amounted to RUB 53,010 million

Key Corporate events of the Third Quarter 2014

• Corporate finance developments

- In July , MegaFon completed the previously-agreed acquisition of a 50% interest in Euroset using the Company's treasury shares, as permitted under the acquisition agreement. This transaction resulted in the extinguishing of a 0.6 billion US-dollar exposure and a reduction in future interest expense

- Standard and Poor's affirmed MegaFon's rating at "BBB-" and upgraded the national currency outlook to "stable", recognizing the Company's robust market position and credit quality

- In October, pursuant to a mandatory put option MegaFon re-purchased at par c. RUB 8.25 billion of its Series 05 ruble-denominated bonds, out of the total issue of RUB 10 billion, placed in 2012

• Promotion of higher mobile data usage

- In August, MegaFon launched sales of Login 3, an upgraded version of its 3G-enabled tablet, at an attractive price of RUB 1,990. Over 430 thousand customised tablets, including Login 3, have been sold since the beginning of 2014

- MegaFon started sales of the new iPhone 6 in its retail stores in September 2014

• Continued focus on customer excellence and higher loyalty

- MegaFon maintained its leadership in customer satisfaction among the Big-3 mobile operators in Russia5 and was named the leader in client-oriented businesses among domestic telecom companies6

- MegaFon significantly improved the quality of its telecommunication services, and expanded coverage in Moscow and the Moscow region through the upgrade of existing base stations and the construction of additional 20% of 4G/3G new base stations during

9 months 2014

• Infrastructure development

- MegaFon successfully deployed a comprehensive Fault Management System, an important milestone in MegaFon's Operation Support System (OSS) project. This system allows us to localize and resolve problems faster, thus improving the overall service quality

- MegaFon signed a 7-year contract with Ericsson to purchase equipment and software for 2G/3G/4G network infrastructure construction and modernisation. The contract is based on the Total Cost of Ownership concept and allows the Company to optimize network rollout costs and reduce maintenance expenses

Ivan Tavrin, Chief Executive Officer of MegaFon, commented on the financial and operational results:

MegaFon's performance in Q3 2014 is in line with our full-year guidance. Compared to a year earlier, our consolidated revenue has increased by 4.5% to 81 .1 billion rubles, and the Company's subscriber base has grown by 3.2 million to reach 71.5 million subscribers.

Our continuing efforts to improve cost efficiency and reduce operating expenditures resulted in our OIBDA growing by 5.3% to 37.3 billion rubles. OIBDA margin in Q3 2014 increased 0.4 percentage points, to 46%.

MegaFon continued to maintain its leading position in the mobile data market. In third quarter we upgraded our 4G/LTE network in St Petersburg with our flagship 4G+/LTE Advanced network and successfully launched operation of 4G/LTE networks in Smolensk, Ivanovo, Novgorod and some cities in Karelia and Mari El. This means that MegaFon's high speed mobile Internet is now available in 68 out of Russia's 85 regions. 4G/LTE roaming coverage has also been expanded to 15 countries. Our leading position in the market has allowed us to increase data revenue in Q3 2014 by 37.4%.

In striving to offer our customers the most advanced technological solutions, we continue to develop relationships with leading foreign suppliers of telecommunications equipment. As an example, in August 2014 MegaFon and Swedish Ericsson signed a seven year strategic agreement to develop and modernise our telecommunications infrastructure.

Our plan to reduce USD exposures, exemplified by our prepayment of 90% of the remaining purchase price for Scartel in June and electing to pay for the remaining 25% interest in Euroset in July, proved to be very prescient in the current volatile foreign exchange market. These transactions not only allowed us to significantly reduce foreign currency exposure in our financials, but also to eliminate further interest expense denominated in USD.

Our results for the first nine months of 2014 confirm our ability to control costs and achieve projected OIBDA growth even in difficult macroeconomic conditions.