"COMSTAR - United TeleSystems" today announced that its Extraordinary General Meeting approved a share option programme that will be funded through a share buyback of Company stock in the form of its Global Depositary Receipts (GDRs).

The rewards allocation under the programme will be completed by the end of 2009 and will include three components: a Stock Bonus plan, a Stock Option plan and a Stock Appreciation Rights(1) (SAR). The total amount of stock, which will be used to fund the Stock Bonus and the Stock Option components, will not exceed 4.5% of the outstanding shares. The amount of SARs, issued under the programme, is subject to a separate decision by the BoD.

The Stock Bonus will be awarded to some members of the Board of Directors (BoD), giving them the right to receive, free of charge, a certain number of Comstar UTS' shares by the end of 2006. Certain senior managers will be granted with Stock Options, while middle managers will receive SARs.

The size of the programme for each particular participant of the programme and membership of the programme is subject to a separate decision by the BoD.

Sergei Shchebetov, the Chairman of the Board of Directors of Comstar UTS, commented: "The programme links the Company's share price performance with the compensation of its Directors, managers and employees. We believe this initiative is very important for governing the Company in the best interests of our shareholders".
In order to fund the share option programme, the BoD approved the share buyback of up to 4.5% of the total number of shares outstanding in the form of GDRs to be completed by the end of 2009.

These repurchases will be made in open market or privately negotiated transactions in accordance with the provisions of the European Commission's regulation no. 2273/2003 of December 22, 2003 (which provides a safe harbor for the execution of share buybacks), and in compliance with the Russian legislation and the London Stock Exchange regulations.

The buyback programme will depend on an on-going assessment of market conditions and does not obligate Comstar UTS to acquire any particular number of GDRs and the programme may be suspended or discontinued at Comstar UTS' discretion.