Comstar Announces Business Development Strategy for the Southern Federal District of Russia.

MOSCOW -- "COMSTAR - United TeleSystems" JSC ("Comstar" or "the Company") (LSE: CMST), the leading combined telecommunications operator in Russia and the CIS, today announced its business development strategy for the Southern Federal District of Russia.

As part of this strategy, Comstar will create a new regional division called "Southern Branch", which will be comprised of the Group's subsidiaries and subdivisions in the Southern Federal District of Russia. The Southern Branch will utilise the existing infrastructure of Comstar's subsidiary in the Rostov region, Digital Telephone Networks South ("DTN"), and the regional offices of the Branch will be created in the cities where Comstar is already present.

The Branch will be managed in accordance with Comstar's unified business development strategy. A horizontal management infrastructure will be put in place and will be comprised of Commercial, Financial, Technological and Marketing departments.

Viktor Koresh, Vice President for Regional Development, commented: "Once we have completed the reorganisation of our operations in the Southern Federal District, we will be the most powerful alternative telecommunications operator in the region, with a modern technological base and a full range of telecommunications services. These changes are being implemented within the framework of Comstar's broader regional strategy, which is aimed at streamlining the business processes of all our subsidiaries and integrating these companies within the unified structure of the Comstar Group."

The Company's investments in the telecommunications services in the South of Russia are expected to reach approximately US$ 20 million in 2008, with US$ 15 million of this amount to be allocated for the development of DTN's business.

According to the Company's estimates, its business in the South of Russia will grow at significantly faster rate than the overall regional telecommunications market in 2008, including by the volume of services to residential and corporate clients.

In 2008, DTN will focus on securing its leading position in the alternative telecommunications market, as well as growing its broadband internet subscriber base and expanding its activities in the cable TV market. DTN intends to launch its IPTV services in the first quarter of 2008 and will begin providing triple-play services by the end of 2008.

Mikhail Monastyrsky, Director of DTN, commented: "We are planning to maintain our relationships with existing clients and expand our offerings utilizing Comstar's experience in this area. Internet access and pay-TV services are expected to generate the largest portion of our revenues in the next several years."

The Krasnodar Territory and the city of Sochi are among the main areas of Comstar's activity in the South of Russia. The South Branch integration strategy is aimed at increasing the existing network resources, the building of NGN networks and the launch of digital TV based on HDTV standards, which are expected to be implemented in 2008. In the first half of 2008, Comstar plans to finalise the creation of Sochi's telecommunication infrastructure development project in cooperation with Intellect-Telecom. This project is expected to be completed by 2014.

In 2008, Comstar intends to start building its Moscow - Rostov-on-Don backbone. This project will assist the Company in reducing its capital expenditure and also provide more attractive broadband tariffs (including IPTV) for customers in the Rostov region and Krasnodar Territory.

For further information, please visit www.comstar-uts.com

Comstar UTS is the leading fixed-line telecommunications company in Moscow, both in terms of revenues and subscribers. Comstar UTS provides voice, data, Internet, pay-TV and other value-added services to residential and corporate subscribers and operators, using its extensive backbone network and exclusive last mile access to 98% of Moscow households. The Company also offers communications services in five Russian regions and certain CIS countries. Comstar had 3.6 million residential subscribers in Moscow, 452,600 broadband internet subscribers in Moscow, 108,600 corporate subscribers in Moscow, and approximately 94,100 regional and international subscribers, as at September 30, 2007. Comstar UTS reported operating revenues of US$ 1,080 million and a 43% OIBDA margin for the nine months ended September 30, 2007. Comstar GDRs are listed under the symbol "CMST" on the London Stock Exchange.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Comstar UTS. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might", the negative of such terms or other similar expressions. Comstar UTS wishes to caution that these statements are only predictions, and that actual events or results may differ materially. Comstar UTS does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Comstar UTS, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries Comstar UTS operates in, as well as many other risks specifically related to Comstar UTS and its operations.