February 21, 2008, Moscow: COMSTAR – United TeleSystems JSC (COMSTAR-UTS, LSE: CMST), the leading supplier of integrated telecommunication solutions in Russia and the CIS, announces that Moscow City Telephone Network JSC, a member of COMSTAR-UTS, has launched the project to upgrade the last mile.

The MGTS' network, covering nearly all Moscow, will be enhanced with fiber-optic lines to connect telephone exchanges with subscriber premises and ADSL2+ equipment to be installed at the premises. This will enable the members of COMSTAR-UTS to significantly speed up the broadband Internet and commercially launch HDTV services.

For the period of 2008-2009 the project’s CAPEX are expected to be about $100 million.

Sergey Pridantsev, President of COMSTAR – United TeleSystems JSC, said: "COMSTAR-UTS has launched one of its largest engineering projects that will enable us to achieve all the business goals in the Moscow broadband market. In addition, the upgrade will drive the provision of exclusive services to our subscribers: broadband Internet, IPTV and HDTV services will be delivered through a single telephone line."

Nikolay Maksimenka, interim CEO of MGTS, said: "Last mile upgrade not only enhances the user experience for the Internet and multimedia services, but also gets over restrictions of MGTS' network infrastructure and ADSL".

Today MGTS launches the last mile upgrade in the pilot zone. The company's specialists will install at subscriber premises specific curbs with ADSL2+ equipment inside and lay the fiber-optic cable from telephone exchanges to the curbs using FTTC (Fiber to the Curb). This will result in the decreased signal attenuation enabling high Internet speeds.

To deliver the signal to the subscriber apartments, the technology uses the existing MGTS' cable infrastructure available in the house. The curbs are to be installed at the same locations as the MGTS' distribution cabinets in use. ADSL2+ will increase the download speed from 6 Mbps up to 24 Mbps.

The pilot zone covers 18,000 households supported by MGTS’ Filevsky and Sevastopolsky branch offices (telephone nodes). In the areas where the most active Internet users live, mass migration to ADSL2+ will start in the 2nd half of 2008. By the end of 2009, 80% of COMSTAR-UTS' broadband subscribers will have been provided with the Internet speed of more than 24 Mbps.

Note

ADSL (Asymmetric Digital Subscriber Line) is the last mile technology for traditional fixed-line networks. It allows high data speeds over conventional copper telephone lines. One of the main ADSL benefits is that it uses the existing copper infrastructure, so there is no need to lay an additional cable to subscriber premises.

ADSL provides downstream speed up to 6 Mbps. ADSL2+ is the next generation ADSL standard, which enables downstream speed up to 24 Mbps.

MGTS' data network supports ADSL-based broadband Internet, data and TV services which are available almost for all Moscow subscribers. Today these services are offered by COMSTAR-Direct (STREAM brand), the leading Internet provider in Moscow, and MGTS itself. In 2007 the number of individuals, who use the STREAM and MGTS Internet services, reached 651,000.