Consolidation of MTS Brings Considerable Change to the Company’s Financial Profile

Moscow, November 18, 2003. Sistema JSFC today announced its consolidated financial and operating results for the six months ended June 30, 2003, prepared in accordance with US GAAP.Solid organic growth and consolidation of MTS in Sistema’s accounts led to an increase in net revenues of 284% to reach $1,571.7 million. Operating income grew by 250% to $451.0 million, and net income rose by 83%, amounting to $92.4 million.

Commenting on the results of the period, Evgeny Novitsky, President of Sistema JSFC, said: “The first half of 2003 marked an important stage in the company’s development. The two landmark events of these six months include our debut Eurobond issue and the acquisition of the 10% stake in MTS. In addition to this, we restructured our oil business through the divestiture of the Kedr-M chain of gas stations and the purchase of a 33% stake in Belkamneft, and worked towards finalization of the Comstar and Kosmos-TV acquisition, which is an important part of the intended merger of Sistema’s CLECs, such as Comstar, MTU-Inform, MTU-Intel, Telmos and Golden Line, into the Unified Digital Operator. Overall, this has been a very successful period, and we are now looking to a similarly successful ending of the year 2003.”

Financial Highlights of 1H 2003

The increase in revenues was driven in the first half of 2003 both by an increase in sales of 343.1%, which was largely due to the consolidation of MTS, and purely organic growth in revenues from financial services of 22.7%. Telecommunications segment continued to be the largest revenue contributor, with its share of aggregated revenues increasing to 87.1% from 56.3% in 1H 2002. Insurance segment revenues grew by $25.8 million, or 41.2%, as we continued to develop and promote new insurance products and to expand our client base.

Our operating income margin decreased to 28.7% of revenues in the first six months of 2003, compared with 31.5% for the same period in 2002. This decrease was attributable primarily to the increase in the depreciation and amortization line following consolidation of MTS, as well as to the impairment provision of $19.3 million, recorded as a result of an impairment test of goodwill assigned to P-Com, and to losses of $6.9 million from damages to Telmos’ and MGTS’ equipment resulting from a fire in one of MGTS’ switching stations, which were charged to operating expenses.

In the reporting period, we also saw a decline in the net income margin, from 12.3% to 5.9%. The decrease was primarily due to the change in the accounting method for our investment in MTS, which resulted in higher interest expense and effective tax rate.

Operational Highlights of 1H 2003

On the operational side, the first six months of the year were marked by two related events. In April, Sistema became the first Russian holding company to enter the Eurobond market. The company successfully placed 5-year notes for the amount of $350 million with a coupon of 10.25%.

The proceeds of the bond offering allowed Sistema to exercise its call option with T-Mobile to purchase an additional 10% stake in MTS for a total consideration of $371 million in cash (including transaction costs). We believe the deal was very successful as it gave Sistema a controlling stake in the largest mobile operator in Russia in terms of subscribers and net revenues, whose share price increased more than 150% significantly over the last several months to reach $81.60 as of November 14, 2003.

In May 2003, we acquired a 33% stake in Belkamneft OJSC, an oil extraction company operating in Udmurtia, for consideration of $32.6 million. In June 2003, we contributed our interest in Belkamneft into the share capital of United Oil Company, or ONK, a newly created entity. The other shareholders of ONK contributed to its share capital the equivalent number of Belkamneft’s voting shares. Our interest in ONK is 50%.

Finally, in the first half of the year the company entered into an agreement with Adamant Advisory Services, Inc. to acquire 50% in Comstar ZAO and 50% in Kosmos-TV ZAO in exchange for Metromedia International Group notes, acquired by ECU Gest, a subsidiary of Sistema, in September-October 2002. The deal, worth approximately $35 million, was finalized in November.

Sistema will hold a conference call and a press briefing in Moscow to discuss the results of the period. Date will be announced later.

For information, please contact:

Investor Relations

Andre Bliznyuk

Tel.: +7 095 730 1543

bliznyuk@sistema.ru

Press Service

Olga Pestereva

Tel. +7 095 730 1705

pestereva@sistema.ru