Moscow, Russia – March 18, 2010 – “COMSTAR – United TeleSystems” OJSC (“Comstar” or “the Group”) (LSE: CMST), a largest integrated telecommunications provider in Moscow and 82 Russian cities, today announced its unaudited consolidated US GAAP  financial results for the fourth quarter and twelve months ended December 31, 2009.

Fourth quarter highlights

• Consolidated revenues up 14% year on year in ruble terms to US$ 411.7 million 

• OIBDA  up 8% year on year in ruble terms to US$ 164.7 million, with OIBDA margin of 40.0% in ruble terms

• Adjusted net income attributable to Comstar-UTS shareholders of US$ 23.0 million when excluding US$ 349.4 million non-cash impairment of shareholding in Svyazinvest  based on the signed memorandum of understanding

• Cash and cash equivalents and short term investments up 14% year on year and 44% quarter on quarter in ruble terms to US$ 419.4 million

• Cash flow from operations up 16% quarter on quarter in ruble terms to US$ 145.4 million

• Cash capital expenditure  of US$ 27.1 million, representing 6.6% of consolidated revenues

• Free cash flow  more than doubled year on year in ruble terms to US$ 118.3 million

• Total broadband subscriber base up 40% year on year and 6% quarter on quarter  to 1.3 million

• DLD/ILD traffic passed through Comstar’s proprietary network increased by 28% quarter on quarter to 146 million minutes

Full year highlights

• Consolidated revenues up 15% year on year in ruble terms to US$ 1,484.8 million

• OIBDA up 9% year on year in ruble terms to US$ 592.8 million, with OIBDA margin of 39.9% in ruble terms

• Adjusted net income attributable to Comstar-UTS shareholders of US$ 92.5 million when excluding US$ 349.4 million non-cash impairment of shareholding in Svyazinvest

• Cash flow from operations stable year on year in ruble terms of US$ 464.6 million

• Cash capital expenditure of US$ 120.3 million, representing 8.3% of consolidated revenues in ruble terms

• Free cash flow up 82% year on year in ruble terms to US$ 344.3 million

Key strategic developments

• Completion of sale of AFK Sistema’s 50.91% stake in Comstar to Mobile TeleSystems (“MTS”) for a total consideration of RUR 39.15 billion (approximately US$ 1.32 billion) on October 12, 2009

• Conclusion of a non-binding memorandum of understanding with OAO Svyazinvest and AFK Sistema to begin negotiations over the reorganization of certain assets that could lead to the disposal of Comstar’s stake in Svyazinvest and an increase in Comstar’s ownership of OAO Moscow City Telephone Network (“MGTS”)

• Acquisition of 14.20% of MGTS from minority shareholders and sale of 11.06% of Comstar to MTS. As a result, Comstar’s stake in MGTS increased to 69.93%, the cross ownership between MGTS and Comstar was reduced to 2.75%, and MTS’s ownership of Comstar increased to 61.97%

• MGTS received approval from the Federal Tariff Service for the revision of regulated local connection tariffs and regulated line rental tariffs for corporate and residential subscribers.  The new tariffs were introduced from February 1, 2010 and MGTS’s average ruble tariffs increased by 10.3%

• Date set for MGTS’s Extraordinary General Meeting of Shareholders on March 26, 2010 with proposal to pay dividends to holders of MGTS preferred shares as at the record date of February 15, 2010. Preferred shares would become non-voting upon dividend payment

• Starting from March 1, 2010 interest rate on RUR 26.0 billion credit facility reduced from 13.35% to 10.5%. Grace period extended till September 27, 2010

• A three year blank credit facility of up to RUR 5.8 billion granted by Sberbank. This credit facility can be utilised until the end of 2010, has an interest rate of 10.5% and has a grace period until the end of 2011.

Sergey Pridantsev, President and Chief Executive Officer, commented: “We either achieved or surpassed our operational and financial goals for 2009. The various strategic structural changes towards the end of the year significantly enhanced our competitive market positions, as well as the Group’s efficiency and transparency levels. The change in our controlling shareholder opens up new opportunities for MTS and us to jointly approach customers with unique integrated offerings, utilising the extensive synergies of our shared backbone infrastructure and accelerating the expansion of our Russian regional footprint.”

“The acquisition of 69.75% of our core asset MGTS’s preferred shares and 3.08% of its ordinary shares has enabled a more effective governance of the Group’s cash flows. The sale of 11.06% of our shares to MTS has successfully decreased the cross-ownership between Comstar and MGTS to 2.75%, and the signing of a non-binding agreement with Svyazinvest and Sistema has enabled us to start the process of finalising the negotiations regarding the potential reorganization of our ownership in Svyazinvest and MGTS and our indebtedness to Sberbank. Our goal is to complete the necessary transactions during 2010, and we have made the necessary preparations for the anticipated restructuring transactions, including the writing down of the value of our Svyazinvest stake to RUR 26 billion. The RUR 10.5 billion non-cash and non-recurring impairment charge has been included in our income statement in the fourth quarter. On March 10, 2010 we agreed a set of new repayment terms with Sberbank. Starting from March 1, 2010 the interest rate has been reduced from 13.35% to 10.5%, and the grace period has been extended until September 27, 2010.”

“Our strategic priorities in 2010 are to finalise the restructuring of our ownership in Svyazinvest, to accelerate the development of our operations in the Russian regions through the up-selling of our pay-TV subscribers to broadband internet services on modernized networks and though selective acquisitions, and to integrate our business processes with MTS, in order to increase Comstar’s value in the interests of all shareholders”.

Irina Matveeva, Chief Financial Officer, commented: “The Group demonstrated its resilience in challenging market conditions by generating 15% year on year ruble revenue growth in 2009 and 6% organic growth. Group OIBDA increased by 9% year on year, with an OIBDA margin of 39.9% at the top of our guidance, following the implementation of a major cost optimization programme, which addressed all cost items, and despite the consolidation of the STREAM-TV regional operations, which had an OIBDA margin of 13% in 2008. The successful integration of STREAM-TV during 2009 has led to a significant improvement in the operating efficiency and performance of the business. Free cash flow was up 82% year on year in 2009, which reflected our ability to generate stable and healthy operating cash flows in tough market conditions. It also reflected our ability to  reduce  our short term capital expenditure levels due to the Group’s low maintenance CAPEX requirements and the gradual and selective network modernization process that we put in place.

“We expect to generate mid single digit percentage point organic ruble revenue growth in 2010. This growth will be driven by the regulated tariff increase for MGTS voice services from the beginning of February, as well as the growth in long-distance traffic volumes and the development of the broadband business in the regions. The normalised long-term OIBDA margin for our business is between 35 and 40%. The 2010 Group OIBDA margin will be impacted by the increase in social taxes and increased marketing spend in the regions to capitalise on the growing demand for our services, which will be offset to an extent by the regulated tariff increase and ongoing up-selling of regional pay-TV subscribers to broadband internet services. We expect cash CAPEX levels to return to the pre-crisis levels of approximately 20% of revenues, and to include the re-launch of the MGTS digitalization project using IMS technology and the active modernization of our regional broadband networks.”

Consolidation and Combination of STREAM-TV

In accordance with the provisions of FASB Accounting Standards Codification (“ASC”) 805 “Business Combinations” and ASC 250 “Accounting Changes and Error Corrections” and, given that Comstar and Sistema Mass Media are commonly controlled, the Group’s consolidated financial information for the periods prior to the acquisition of STREAM-TV Group shall be restated as if STREAM-TV had been owned and consolidated in the prior periods. The comparative financial information for the fourth quarter and twelve months of 2008 (except for the balance sheet as of December 31, 2008) have been presented in this report as it was reported in 2008, which is a departure from US GAAP. Management will eliminate this departure in Comstar’s annual financial statements included in the 2009 annual report.