Moscow, Russia – July 7, 2008 – “COMSTAR – United TeleSystems” JSC (“Comstar” or “the Group”) (LSE: CMST), the leading integrated telecommunications operator in Russia and the CIS, today announced the acquisition of 100% stake in LLC “Strategy”, the owner of 100% of the share capital of CJSC Ural Telephone Company (“UTC”), the number one alternative telecommunications operator in Ekaterinburg and the Sverdlovsk region , for a total cash consideration of RUB 1.015 billion (approximately US$ 43.4 million ). The Company was acquired from individuals.

UTC is the leading player in the alternative fixed-line communications market in Ekaterinburg and the Sverdlovsk region. The operator provides local and zonal connection services, as well as broadband internet access based on the ADSL and Ethernet technologies, for residential and corporate subscribers. The services are supported by the fully digital connection network.

UTC owns 800 kilometres of its own fiber-optic connection network which currently covers most of the territory of Ekaterinburg, as well as the largest towns of the Sverdlovsk region. The Company has over 4,000 points of presence in the Sverdlovsk region.

UTC has a numbering capacity of 150,000 telephone numbers in Ekaterinburg, of which 61,000 are installed numbers. The Company also has 13,000 telephone numbers in the other towns of the Sverdlovsk region, of which 5,500 are installed numbers. The Company has a modern technical infrastructure and allows for expanding the operations without significant additional investments. UTC services more than 50,000 telephone numbers, with about half of these numbers being provided to corporate subscribers.

The Company reported revenues of US$ 20.7 million, up by 43% year-on-year, with EBITDA of US$ 4.7  million and an EBITDA margin of 23% as at December 31, 2007. The Company’s net debt amounted to US$ 5.1 million at the time of signing the contract.


Sergey Pridantsev, President and Chief Executive Officer of Comstar UTS, commented: “We have acquired one of the leading alternative operators in Russia in line with the Group’s regional development strategy. The acquisition of UTC allowed us to significantly expand our presence in the telecommunications market of the Ural Federal District, where we are already operating in the Tyumen region, the Khanty-Mansi and the Yamalo-Nenets Autonomous Areas. Ekaterinburg is one of the largest and most economically developed cities in Russia, and we are entering this market as a leading player among alternative telecommunications operators.”

Viktor Koresh, Vice President for the Development of the Group’s Operations, added: “Ural Telephone Company will be focused on providing broadband internet access services and increasing sales in the highly profitable corporate segment. The Company also plans to launch IP-TV services and provide long-distance connection. We expect to have a significant increase in revenues from providing broadband internet services to residential subscribers in the Sverdlovsk region due to the low internet penetration among local households which accounts to around 8%.”