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Press Release -- May 27th, 2013
Source: Telefonica

Telefónica and MegaFon sign global strategic partnership agreement

Madrid/Moscow, 27th May 2013.- Telefónica S.A. (“Telefónica”) (NYSE:TEF, news, filings) and open joint stock company MegaFon (“MegaFon”) (LSE: MFON), a leading Russian universal telecommunications operator, jointly announce that they have established a strategic partnership. Under this Agreement MegaFon will join Telefónica’s Partners Programme, which enables telecommunications operators to work together and to benefit from Telefónica’s scale and knowledge.

This new partnership between both companies will facilitate cost optimisation in equipment purchases via joint procurement and MegaFon and Telefónica will also exchange technological know-how. Under the Agreement Telefónica will provide services to multinational corporate clients using MegaFon’s network and similarly MegaFon business customers will have access to  services when abroad.

In the future, MegaFon and Telefónica via their respective specialised subsidiaries, with their focus on rapid development, launch and monetisation of products in adjacent telecom businesses, may also promote the development of various new businesses (such as OTT, cloud services or M2M), creating new growth opportunities for both companies.

The Agreement between MegaFon and Telefónica will expand Telefonica’s Partners Programme and will increase the number of its participants, which already include equity partners such as China Unicom and Telecom Italia, as well as other members. Currently Telefónica and its Partners provide services to customers in 52 countries with a population of 1.5 billion people.

Ivan Tavrin, Chief Executive Officer of MegaFon, commented: “Joining Telefónica’s Partners Programme is in line with MegaFon’s long term strategy focused on efficient growth, mobile Internet service development and enhancement of the customer experience. This Agreement enables us to work with the best  international professionals  to use their experience in improving quality of services, customer relationship management and in new product development”.

Eduardo Navarro, Telefónica Group’s Chief Strategy and Alliances Officer, stated: “We are committed to jointly work to take advantage of our outstanding strategic alignment and to make available the benefits of Telefónica’s scale and breadth of business through the Telefónica Partners Program, as well as to tackle together the challenges the industry transition is posing to operators worldwide”.

For more information:

OJSC MegaFon                                                         

Media: Peter Lidov                                           Tel: + 7 926 200 6699

Investor Relations: Dmitry Kononov                   Tel: + 7 926 200 6490

Citigate Dewe Rogerson (Londres)                   Tel: +44(0)20 7638 9571

David Westover

Marina Zakharova

Telefónica S.A.                                                 Tel.: +34 914823800

Notes To Editors

Telefónica is one of the largest telecommunications companies in the world in terms of market capitalisation and number of customers. From this outstanding position in the industry, and with its mobile, fixed and broadband businesses as the key drivers of its growth, Telefónica has focused its strategy on becoming a leading company in the digital world.

The company has a significant presence in 24 countries and a customer base that amounts close to 316 million accesses around the world. Telefónica has a strong presence in Spain, Europe and Latin America, where the company focuses an important part of its growth strategy.

Telefónica is a 100% listed company, with more than 1.5 million direct shareholders. Its share capital currently comprises 4.551.024.586 ordinary shares traded on the Spanish Stock Market (Madrid, Barcelona, Bilbao and Valencia) and on those in London, New York, Lima, and Buenos Aires.

MegaFon OJSC is a leading Russian universal telecommunication service provider, operating in all segments of the telecommunications markets in Russia. MegaFon was incorporated in June 1993 as CJSC “Northwest GSM” and renamed OJSC “MegaFon” in 2002. MegaFon was the first operator with a network covering all regions of Russia. The Company and its subsidiaries have licenses to operate in all of the Russian regions and in the Republics of Abkhazia, South Ossetia and Tajikistan. The Company was the first in Russia to launch 3G for commercial operations and is currently in the number one position among all operators in the provision of mobile Internet, and in the number two position as to the number of active subscribers in Russia.

In 2009, MegaFon was selected as the Mobile General Partner of the XXII Winter Olympic Games and XI Paralympic Games to be held in Sochi in 2014.

As a result of its acquisition of the Synterra Group, one of the leading Russian backbone operators, in June 2010, MegaFon substantially increased its fixed-line B2B and B2G businesses, as well as its provision of fixed broadband services. In July 2012 MegaFon was awarded one of four ten-year licenses for the provision of 4G/LTE services throughout the entire Russian Federation and, through its MVNO arrangement with Yota, has already started providing these services in 81 towns and cities in 29 different regions by the end of March 2013. In September 2012 the Company acquired the VAS Media group of companies, which are now being integrated with MegaLabs, its R&D subsidiary. In December 2012 the Company acquired a 25% interest in the Euroset retail chain, the largest chain in Russia providing telecommunications goods and services, and is committed to acquire a further 25% within the next three years.

In November 2012 MegaFon successfully completed an initial public offering on the Moscow Stock Exchange and the London Stock Exchange. MegaFon has two principal shareholders, companies in the AF Telecom group (approximately 50.01%) and the TeliaSonera group (approximately 25.17%). Additional shares are held by its CEO, Ivan Tavrin (2.5%) and by a wholly owned subsidiary of the Company (7.57%, of which Mr. Tavrin has the right to acquire up to 2.5% at various times prior to 2017), while the public float represents approximately 14.75% of the outstanding shares.

Disclaimer/ Forward Looking Statements

Certain statements and/or other information included in this document may not be historical facts and may constitute “forward looking statements” within the meaning of Section 27A of the U.S. Securities Act and Section 2(1)(e) of the U.S. Securities Exchange Act of 1934, as amended. The words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “plans”, “forecast”, “project”, “will”, “may”, “should” and similar expressions may identify forward looking statements but are not the exclusive means of identifying such statements. Forward looking statements include statements concerning our plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues, operations or performance, capital expenditures, financing needs, our plans or intentions relating to the expansion or contraction of our business as well as specific acquisitions and dispositions, our competitive strengths and weaknesses, our plans or goals relating to forecasted production, reserves, financial position and future operations and development, our business strategy and the trends we anticipate in the industry and the political, economic, social and legal environment in which we operate, and other information that is not historical information, together with the assumptions underlying these forward looking statements. By their very nature, forward looking statements involve inherent risks, uncertainties and other important factors that could cause our actual results, performance or achievements to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the political, economic, social and legal environment in which we will operate in the future. We do not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. We expressly disclaim any obligation or undertaking to update any forward-looking statements to reflect actual results, changes in assumptions or in any other factors affecting such statements.

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