Comstar UTS Introduces Share Option Plan and Funds It Through Share Buyback Programme.

MOSCOW, Russia -- "COMSTAR - United TeleSystems" ("Comstar UTS") (LSE:CMST), the leading provider of integrated communications services in Moscow, 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 Rights1 (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.

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

Comstar UTS is a leading provider of integrated communications services in Moscow and the Moscow region in terms of revenues and subscribers and also offers communications services in other regions of Russia and the Commonwealth of Independent States. Comstar UTS had 3.6 million subscribers in its traditional segment of the business, 479.2 thousand subscribers in its alternative segment in Moscow and 91.1 thousand subscriber in its alternative segment in the regions at June 30, 2006. Comstar UTS offers voice, data and Internet, pay-TV and various value-added services to corporate, operator and residential subscribers, using its alternative and traditional fixed-line networks. Comstar UTS had consolidated operating revenues of US$ 249.8 million for the first three months of 2006 and Comstar UTS' consolidated assets totalled US$ 2.67 billion at March 31, 2006. Comstar UTS ordinary shares are listed on the Moscow Stock Exchange and on the London Stock Exchange under the symbol "CMST".

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 you 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.

1 SAR- under the Stock Appreciation Right a number of middle managers will be eligible to receive a cash bonus tied to the stock appreciation of Comstar UTS shares during a certain period, where the bonus is calculated based on the number of conditional shares allocated to them and calculated by multiplying these shares by the total percentage of the stock appreciation during the period.