OREANDA-NEWS. December 26, 2014. Rostelecom OJSC (MOEX - RTS: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces that its Board of Directors has approved a deal to create a media joint venture (“JV”) with the All-Russia State Television and Radio Broadcasting Company (“VGTRK”), Russia’s leading producer of pay-TV channels for cable and satellite broadcast.

The JV will be made up of VGTRK’s Digital Television and Rostelecom’s subsidiary NKS-Media.

The main aim of the JV is to accelerate the development of the combined media assets in the field of production and distribution of semantic pay-TV channels for cable and satellite broadcast. The participation in creation of Russia`s leading producer of semantic pay-TV channels, together with one of the country`s largest media holdings VGTRK, will provide Rostelecom with access to an expertize of high-quality original content creation. In addition, this will also enable the company to benefit from economies of scale.

The deal is structured as follows:

Digital Television will carry out an additional share issue by private subscription, with the proceeds going to Rostelecom;

Rostelecom will acquire ordinary registered uncertified shares of Digital Television during its additional share issue and receive 25.33% of Digital Television’s voting shares. Rostelecom will pay for these shares using 100% of its equity interest in NKS-Media and RUB 250 million in cash.

Rostelecom’s assets contribution to the JV amounts to more than RUB 1 billion.

Sergey Kalugin, President of Rostelecom, commented: “We have considered a number of scenarios for the further development of our TV channels and have made the decision to consolidate them with VGTRK media assets, becoming a shareholder of the leading player on semantic pay-TV channels market. We believe they will generate greater value as part of a larger JV with VGTRK rather than attempting to develop our media business as a standalone entity. This will enable the combined company to obtain a much stronger position in the market, manage its costs more efficiently and enhance a leadership in quality of content.”