Moscow, Russia – October 27, 2006 – JSC “COMSTAR – United TeleSystems” (“Comstar UTS”, LSE: CMST), the leading provider of integrated telecommunication services in Russia and the CIS, today announced that it has acquired majority shareholding in CallNet and its 100% owned subsidiary Cornet (together the “Group”) in the Republic of Armenia. Comstar has purchased 75% of the shares plus one share with an option to acquire the remaining stake in the Group. The companies together comprise the second largest alternative telecommunications group in the Republic of Armenia: Callnet is a transit operator and Cornet is an Internet Services Provider.

CallNet is one of the four telecom operators in the Republic of Armenia, which have a license to provide transit of international traffic across Armenia, a strong competitive advantage due to high volume of incoming international voice traffic in Armenia. Cornet has a fast growing customer base, including 76% of the banking sector in Armenia. In 2005 the consolidated revenues of the Group doubled year- on –year to US $4.3 million.

Eric Franke, CEO and President of Comstar – United TeleSystems, commented: «Both companies have leading positions in the fast growing telecom segments in the Republic of Armenia – data transmission and Internet access- the same business model that Comstar has in Russia. Cornet is a sole provider of WiMax services in Armenia, and we will use their expertise in the deployment of WiMax services in Russia. This acquisition clearly provides us with additional synergies within Comstar-UTS Group».

The purchase of CallNet and Cornet is the second transaction by Comstar UTS in the CIS, and it follows on the JV agreement signed in June of 2006 to establish the subsidiary Comstar – Ukraine with the local partner OOO Neotel.

“This is the first transaction in a pipeline of new acquisitions which we announced in October 2006 to make use of IPO proceeds in order to implement our investment program in the regions”, - continued Eric Franke.