Moscow, Russia – May 28, 2008 – “COMSTAR – United TeleSystems” JSC (“Comstar” or “the Company”) (LSE: CMST), the leading integrated telecommunications operator in Russia and the CIS, today announced that it has signed a strategic agreement with FON Wireless Ltd. (“FON”), a developer of a shared wireless internet access network based on Wi-Fi technology.

The FON network currently covers approximately 230,000 Wi-Fi hot-spots around the world. Any internet user with unlimited broadband internet access is able to use FON’s Wi-Fi router, La Fonera. This router is a part of the global Wi-Fi network which can be used by anyone who has WiFi-enabled equipment for internet access. The FON shared wireless network is, therefore, created and expanded by the users installing La Fonera routers, which can also be used for connecting to personal networks.

Coral Sistema Strategic Fund, the venture fund set up by Sistema, is one of the owners of the FON network. The world leading companies and investments funds, such as Google, British Telecom, Skype, Neuf Cegetel, Index Ventures, Sequoia Capital, Excite and Digital Garage, are among FON’s investment partners.

Under the terms of the agreement, Comstar and FON will develop a Wi-Fi internet access network. It will be created on the basis of the Comstar subscriber base in Moscow and will, therefore, enable the local customers to join the worldwide FON network. Within the framework of the project, Comstar plans to establish 30,000 Wi-Fi access points in Moscow in 2008-2009.

Broadband subscribers in Moscow will be able to rent La Fonera routers from Comstar, connect them to their ADSL or any other broadband internet access channel and join the FON network. The service will provide internet access at no extra cost in any places covered by FON, including the Comstar – FON network, using personal login and password details for the Comstar’s Moscow ADSL network.

The subscriber’s access point will also become “public” and might be used for internet access by both FON customers and others. The access of external clients to Comstar – FON network will be implemented with the help of pre-paid cards, SMS authorization and other means of receiving login and password details. The pre-paid cards will be sold by Comstar and FON through their sales channels.

Denis Muratov, Vice President, Head of Innovations and Science, commented: “We are very interested in global innovation projects which allow the introduction in Russia of new technologies and business development models, such as Comstar and FON’s joint project to develop the worldwide Wi-Fi network in the territory of Russia. We see the global expansion of services provided by our subsidiaries as a positive development.”

Sergey Pridantsev, President and Chief Executive Officer of Comstar UTS, commented: “Comstar is an exclusive operator of the FON network in Russia. The project with FON is an important addition to our programme of broadband access development aimed at providing our subscribers with the opportunity to be always connected. The agreement with FON will allow the users to join the global network in many places around the world, and we will be able to provide services not only to our subscribers, but also to other users in Moscow. We are planning to expand our joint project with FON to the Russian regions.”
    
Martin Varsavsky, the founder and co-owner of FON Wireless Ltd., added: “FON is a unique network, and it is becoming exceedingly popular in many countries. We are very interested in cooperation with Comstar. This company is actively operating in the internet access market and is the market leader by subscribers in Moscow. Comstar is currently implementing a number of projects aimed at developing wireless internet access technologies, which is of great interest to us because of the potential opportunity for synergies with the FON network.”