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Russia's Rostelecom boosts Q1 earnings 43 pct, revenues rise

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MOSCOW, May 17 (Reuters) - State-controlled Russian telecoms operator Rostelecom said on Tuesday its first-quarter net profit rose 43 percent to 3 billion roubles ($46 million), year-on-year, helped by foreign exchange and financial gains.

The company said forex gains and revaluation of financial instruments helped lift earnings despite a 1.9 billion rouble loss related to its interest in a mobile joint venture with Tele2 Russia.

Rostelecom has a 45 percent stake in the venture, Russia's fourth-biggest mobile phone operator, which has been investing heavily in data networks to catch up with bigger rivals MTS , Megafon, and Vimpelcom.

Revenues edged up 1.1 percent to 72.5 billion roubles amid an increase in the number of Internet and TV subscribers by 6 percent and 9 percent from a year ago, driving sales in these business segments by 4 percent and 23 percent respectively.

The company also boosted sales of VPN and cloud services as well as revenues from traffic transit, helping offset an 11 percent fall in core, fixed-line telephony sales.

"For the remainder of 2016, a great deal of our attention will be spent on building business in new digital segments," Chief Executive Officer Sergei Kalugin said.

The company confirmed its 2016 forecast for 1-2 percent revenue growth, flat operating income before depreciation and amortisation (OIBDA) and capital expenditure (capex) of less than 19 percent of revenues.

In the first quarter, OIBDA edged up 0.7 percent to 24.7 billion roubles while consolidated free cash flow was at a negative 2.4 billion roubles due to a 16-percent rise in capex.

Kai-Uwe Mehlhorn, Rostelecom chief financial officer, said free cash flow would be positive in the remaining three quarters of the year, allowing it to pay dividends in line with its policy.

($1 = 64.9596 roubles)

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