Comstar to Consolidate Comstar-Direct

"COMSTAR – United TeleSystems” OJSC ("Comstar” or "the Group”) (LSE: CMST), the leading integrated telecommunications operator in Russia and the CIS, today announced that it has completed negotiations with Sistema Mass Media and commenced the consolidation of Comstar-Direct, a leading provider of broadband internet access services in Moscow. Comstar currently owns 51.8% of Comstar-Direct, with the remaining 48.2% owned by Sistema Mass Media. The transaction is being effected by means of a division of Comstar-Direct’s balance sheet according to Russian Accounting Principles and in proportion to Comstar and Sistema Mass Media’s equity ownership in the company. Upon completion of the reorganization, the majority of Comstar-Direct’s assets related to the provision of multimedia solutions, including broadband and TV services, as well as Comstar-Direct’s subscriber base, will be transferred to Comstar. The proposed transaction structure was approved by the Board of Directors of Comstar-Direct on June 4, 2008, and is now subject to the approval of Comstar, Comstar-Direct and Sistema Mass Media’s shareholders. Comstar will continue to provide broadband internet access via the MGTS network, as well as IP-TV services to Comstar-Direct’s 750 thousand subscribers as at the beginning of the second quarter of 2008. Comstar will also continue to broadcast and sell its package of ‘Stream’ branded pay-TV channels to its 134 thousand triple-play subscribers in Moscow through the MGTS broadband network, but the content production part of the Comstar-Direct business will be transferred to Sistema Mass Media, including responsibility for the five own-produced pay-TV channels and IP content platform. The division of the business will therefore have no impact on Comstar’s revenues but will reduce Comstar’s cost base. Sergey Pridantsev, President and Chief Executive Officer, commented: "The consolidation of the Comstar-Direct business is a key step and in line with our strategy to simplify our ownership, organizational and operating structures. It will enable us to focus purely on providing enhanced services to our customers, whilst also increasing profitability levels moving forward. The consolidation process is expected to be completed by the end of the third quarter of 2008.” For further information, please visit www.comstar-uts.com Comstar UTS is the leading fixed-line telecommunications company in Moscow. Comstar provides voice, data, television and other value-added services to residential and corporate subscribers and operators, using its extensive backbone network and exclusive last mile access to 97% of Moscow households. The Company also offers communications services in five Russian regions, Armenia and Ukraine. Comstar had 3.6 million residential subscribers and 750 thousand residential broadband internet subscribers in Moscow, as well as 40 thousand residential regional and international broadband internet subscribers at the end of March 2008. Comstar generated US$ 1,562.4 million and US$ 417.0 million of revenues and a 42.5% and 40.8% OIBDA margin for the twelve months ended December 31, 2007 and the three months ended March 31, 2008, respectively. Comstar’s Global Depositary Receipts are listed on the London Stock Exchange (ticker: CMST). Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Comstar UTS. You can identify forward looking statements by terms such as "expect,” "believe,” "anticipate,” "estimate,” "intend,” "will,” "could,” "may” or "might”, the negative of such terms or other similar expressions. Comstar UTS wishes to caution that these statements are only predictions, and that actual events or results may differ materially. Comstar UTS does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Comstar UTS, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries Comstar UTS operates in, as well as many other risks specifically related to Comstar UTS and its operations.