Moscow, Russia – October 7, 2010 – “COMSTAR – United TeleSystems” JSC (“Comstar”) (LSE: CMST), the largest integrated telecommunications provider in Moscow and 83 Russian cities, with a presence in Ukraine and Armenia, today announces that its majority owned subsidiary OJSC Moscow City Telephone Network (“MGTS”) will invest RUB 13 billion until the end of 2013 in upgrades to its telephone network, of which approximately RUB 2 billion are expected in 2010. Following the completion of the modernization, MGTS’ network will be fully digitalised.

Sergey Ivanov, CEO of MGTS, commented: “By investing in technology, we also invest in our customers. Digital solutions will allow us to offer our Moscow residents the latest telecom services, including voice calls, broadband Internet access, and text and image messaging services, and the high tech equipment is expected to lower the cost of our multiservice offerings, and will demand lower levels of resources than current analogue exchanges.”

A fully digitalised network is one of the things required to offer modern telecom services. 63.0% of MGTS’ network was digitalised in the beginning of 2010, and the level is expected to increase to 68.8% by the end of year. MGTS’ goal is to maintain the current pace of network modernization, and to have a fully digitalised level by the end of 2013. The digitalisation also allows MGTS to decrease it maintenance costs for analogue exchanges, modernise its business processes, optimise staffing levels and increase the Company’s overall efficiency.

The installation of new and more compact equipment within the framework of the comprehensive modernization programme will allow MGTS to free up space previously utilised by analogue exchanges. MGTS already rents out more than 50,000 square meters of office and industrial real estate, which results in more than half a billion of rubles in annual revenues for the company. The real estate available following the modernization of the network is expected to provide MGTS with additional property leasing revenues of up to RUB 2 billion between 2011 and 2013.