Moscow, Russia - December 12, 2006 - "COMSTAR - United TeleSystems" OJSC ("Comstar UTS" or "The Group") (LSE: CMST),  the leading provider of integrated communications services in Moscow, today announced the acquisition of a blocking stake 25% plus one share in Telecommunication Investment Joint Stock Company (Svyazinvest) from Mustcom Limited for a total cash  consideration of US$ 1.3 billion. In a series of transactions, Comstar UTS and MGTS Finance S.A., a company controlled by Comstar UTS, have jointly acquired 4,879,584,306 ordinary shares of Svyazinvest, with Comstar UTS buying 3,378,173,750 shares, which represent 17.3% of total outstanding shares, and MGTS Finance S.A. purchasing 1,501,410,556 shares, representing 7.7% of total outstanding shares.  

Simultaneously with  the acquisition of the 25% stake plus one share in Svyazinvest, MGTS Finance S.A. and "2711 Centerville Cooperatief U.A." signed a put and call option agreement, which gives "2711 Centerville Cooperatief U.A." a right to purchase and sell 46,232,000 shares of Comstar - UTS, representing 11.06% of total outstanding shares, from MGTS Finance S.A.  The call option acquired by "2711 Centerville Cooperatief U.A." may be exercised at a strike price of US$ 6.97 per share at any time following the signing of this agreement with respect to 10.5% of Comstar UTS' shares.  The call option for the remaining 0.56% stake may be exercised beginning from April 01, 2007. The call option will expire one year from the date of signing of this agreement. "2711 Centerville Cooperatief U.A." may exercise its put option within two years from the date of exercising the call option at a strike price, which will be calculated based on a weighted average price of Comstar UTS GDRs during the period. 

Sergei Shchebetov, Chairman of the Board of Directors of Comstar UTS and General Director of ZAO Sistema Telecom, commented: "The acquisition of a blocking stake in Svyazinvest is in line with our previously stated intention to use IPO proceeds for value accretive acquisitions. This is a strategic deal for both Comstar UTS and Sistema Telecom, which enables us to become a leading fixed-line operator in Russia and CIS".