Moscow, Russia – January 20, 2008 – “COMSTAR – United TeleSystems” JSC (“Comstar” or “the Group”) (LSE: CMST), the largest integrated telecommunications provider in Moscow and 66 Russian cities, today announced that it has completed the consolidation of a 100% stake in ZAO Comstar-Direct with effect from December 30, 2008.

Comstar-Direct has been restructured by means of establishing and spinning off a new legal entity to take control over a part of Comstar-Direct’s assets and liabilities in proportion to Sistema Mass Media’s 48.18% stake in Comstar-Direct. In line with the revised reorganisation programme, the legal merger of Comstar-Direct and Comstar is not expected to be implemented until the capital markets and broader economic environment have stabilised. However, all of the other terms for the reorganisation of the business remain unchanged since the announcement on June 5, 2008.

Under the terms of the agreement, Comstar will assume control of the management of the part of Comstar-Direct that provides multi-media services (broadband internet access and pay-TV) and its subscriber base. All of the corporate procedures related to the reorganisation of Comstar-Direct are expected to be completed by the end of the first quarter of 2009.

The revised restructuring programme was approved by the Comstar-Direct Board of Directors on September 16, 2008, and by the Comstar-Direct EGM on October 27, 2008.

As previously announced, the Comstar EGM held on July 28, 2008, did not approve the resolution on the merger of Comstar and Comstar-Direct due to unfavorable market conditions and the requirement to preserve the equal rights of all Comstar shareholders. Comstar’s management has revised the Comstar-Direct restructuring programme in order to simplify the Group’s corporate structure and eliminate the dependence of the process on prevailing market conditions.

In September 2008, the Comstar Board of Directors approved the new organizational structure and the process of integrating the Comstar-Direct business. According to the new structure, the Comstar-Direct employees will be transferred to Comstar by the end of the first quarter of 2009. Broadband internet access services constitute the core and fastest developing business of the Group and Comstar does not, therefore, plan to significantly adjust Comstar-Direct’s employee base, which currently numbers approximately 1,000 people.

Sergey Pridantsev, President and Chief Executive Officer of Comstar UTS, commented: “The operating activities of Comstar-Direct have been integrated within Comstar prior to the legal reorganization. We have already significantly enhanced the transparency of the business processes in Comstar-Direct and been able to further streamline the Group’s management structure as a result of this reorganization.”