- The Boards of MTS and Comstar have recommended a merger to create the largest integrated telecommunications provider in Russia and the CIS
     - Merger exchange ratio: 0.825 MTS ordinary shares for one Comstar ordinary share, representing a 7.7% premium to the three month^[1] volume weighted average exchange ratio between MTS’s ordinary shares and Comstar’s Global Depositary Receipts (GDR)
     - MTS and Comstar Extraordinary General Meetings (EGMs) expected to be convened on December 23, 2010 for shareholders to vote on the proposed merger
     - Comstar Board approval and recommendation of the transaction is based on the recommendation of a Comstar Special Committee of Independent Board Directors.

- In connection with the merger and subject to review by the Federal Service for Financial Markets (FSFM), MTS will launch a Voluntary Tender Offer (VTO) for up to 37,614,678 Comstar ordinary shares (including shares underlying Comstar GDRs), representing 9.0% of the issued share capital of Comstar, at RUR 220.0 per share
     - Implied VTO price per Comstar GDR of USD 7.16^[2] represents a 13.1% premium to the three month volume weighted average trading price of the Comstar GDR
     - VTO documentation to be disclosed and posted to Comstar shareholders following FSFM review

Moscow, Russian Federation — The Boards of Directors of Mobile TeleSystems OJSC (“MTS” – NYSE: MBT), the leading telecommunications provider in Russia and the CIS, and COMSTAR – United TeleSystems JSC (“Comstar” - LSE: CMST), a leading supplier of integrated telecommunication solutions in Russia and the CIS, announce that they have approved and recommend the merger of MTS and Comstar. MTS currently owns 61.97% of Comstar (64.03% excluding treasury shares) and consolidates Comstar in its financial results. As a result of the statutory merger (“prisoedinenie” under Russian law), Comstar will be subsumed into MTS and will cease to exist as a separate legal entity.

The Boards believe that the full consolidation of Comstar into MTS is strategically important for both companies.  A statutory merger is intended to facilitate the full integration of MTS’s and Comstar’s subscriber bases and enable the cross-selling and bundling of broadband and television services to MTS’s customers. As a result, the merger is expected to create additional synergies and cost savings across the combined entity and strengthen its competitive position. MTS is on track to exceed the USD 200 million of cost synergies indicated when it purchased majority control of Comstar in October 2009.

According to the merger terms agreed between the MTS and Comstar Boards, eligible Comstar shareholders will receive 0.825 MTS ordinary shares for each Comstar ordinary share that they own (with one Comstar GDR representing one ordinary share)^[3]. The exchange ratio represents a 7.7% premium to the three month volume weighted average exchange ratio between MTS ordinary shares and Comstar GDRs. The merger is conditional on the approval of 75% of the shareholders present at each company’s EGM, the receipt of regulatory clearance and other closing conditions. MTS and Comstar expect to convene EGMs on December 23, 2010, at which their respective shareholders will vote on the merger. As required by Russian Joint Stock Companies Law, MTS and Comstar shareholders who vote against or do not vote on the merger will have the right to sell their shares back to MTS and Comstar, respectively, for cash at a price set by the respective companies’ Boards of Directors, subject to the statutory limit of 10% of each company’s Net Asset Value under Russian Accounting Standards as determined at the most recent reporting date preceding each company’s EGM^[4]. Taking into account the independent statutory appraisals carried out separately by Ernst & Young for MTS and Comstar, the Board of Directors of MTS has set the repurchase price at RUR 245.19 per MTS ordinary share, while the Comstar Board of Directors has set its repurchase price at RUR 212.85 per Comstar ordinary share. MTS and Comstar shareholders wishing to sell their shares back to the respective companies will be able to sell their shares pro rata in the event of over-subscription. The companies expect to complete the merger transaction in the second quarter of 2011.

MTS will also launch a parallel voluntary tender offer (VTO) for up to 37,614,678 Comstar shares, representing 9.0% of the issued share capital of Comstar, at RUR 220.0 per Comstar ordinary share. The implied VTO price per GDR is equivalent to USD 7.16, which represents a 13.1% premium to the three month volume weighted average trading price of the Comstar GDR on the London Stock Exchange. The VTO documentation has been submitted for review to the FSFM and, following this review, the offer will be made by delivery of the VTO documentation to the Comstar Board of Directors.  The Comstar Board will thereafter deliver the VTO documentation to Comstar ordinary shareholders and to Comstar GDR holders via Deutsche Bank (the depositary bank for Comstar’s GDR facility). Comstar shareholders subscribing to the VTO will receive a pro rata cash allocation in the event of over-subscription to the VTO.

The combined merger and voluntary tender offer structure, together with the statutory right of shareholders to sell their shares back to MTS and Comstar, is intended to facilitate a cash and stock transaction, whereby the companies can be combined after completion of the merger. In the event of full election of the cash alternatives, through the VTO and the sale of shares back to Comstar, the implied transaction value could be up to USD 1,030 million.

Mikhail Shamolin, President and Chief Executive Officer of MTS, commented: “We believe that the merger of MTS and Comstar is attractive for our shareholders because it will accelerate the delivery of our “3i” strategic goal of realizing growth through increasing customer value, by providing our customers with a broad, innovative and integrated offering of mobile and fixed line telephony, high-speed internet access and pay-TV services. The merger will enable the full integration of the Comstar and MTS customer bases and the provision of bundled service offerings across Russia, which we believe will further enhance our combined competitive position. In particular, the merger is expected to streamline common business processes and further optimize operating and capital expenditure. The structure of the merger provides a mix of stock and cash alternatives for Comstar minority shareholders, and also enables MTS to retain the financial resources and flexibility to invest in the combined Group moving forward in key areas such as broadband network development and 3G deployment.”

Thomas Holtrop, Chairman of the Comstar Special Committee of Independent Board Directors, commented: “The Special Committee of Independent Board Directors has negotiated the terms of the transaction with MTS and recommended that the Board of Comstar vote to approve the merger terms and the transaction as a whole. We believe that the transaction presents Comstar minority shareholders with attractive alternatives, as it will enable them to participate in the future upside potential of the combined entity by accepting shares in MTS or, alternatively, to receive cash by exercising their statutory right to sell their shares back to the company. We look forward to receiving and considering the voluntary tender offer in the coming weeks.”

Goldman Sachs International is acting as financial advisor to MTS. J.P. Morgan plc provided a fairness opinion to the Comstar Special Committee of Independent Board Directors.  Latham & Watkins LLP is acting as legal advisor to MTS, and Linklaters CIS is acting as legal advisor to Comstar. Ernst & Young provided independent statutory appraisals to MTS and the Comstar Special Committee of Independent Board Directors for the purposes of each company’s assessment of the prices to be paid in relation to the statutory right of shareholders to sell their shares back to each respective company.

MTS and Comstar will host a joint conference call today, which will start at:

18:00 hrs (Moscow time)
15:00 hrs (London time)
10:00 hrs (US Eastern time)

To take part in the conference call, please dial one of the following telephone numbers, quoting the MTS and Comstar call:

From Russia: +7 495 545 0587       PIN: 3444521#
From the US: +1 718 354 1152       PIN: 3444521#
From the UK: +44 203 140 8286     PIN: 3444521#

A replay of the conference call will be available from approximately 22:00 Moscow time / 19:00 London time / 14:00 US Eastern time today until July 1, 2010:

From Russia: 810 800 2870 1012   PIN: 3444521#
From the US: +1 347 366 9565      PIN: 3444521#
From the UK: +44 207 111 1244    PIN: 3444521# 

A slide presentation has also been posted at

https://www.mtsgsm.com/news/2010-06-25-28131/
and
https://www.comstar-uts.ru/common/img/uploaded/100625_Proposed_Merger_Presentation.pdf

For more information, please visit https://www.mtsgsm.com/and https://www.comstar-uts.com/or contact:

Joshua B. Tulgan
Director, Investor Relations
Acting Director, Corporate Finance

Department of Investor Relations
Mobile TeleSystems OJSC
Tel: +7 495 223 2025
E-mail: ir@mts.ru

Learn more about MTS.   Visit the official blog of the Investor Relations Department at www.mtsgsm.com/blog/

Comstar UTS
Masha Eliseeva
Tel: +7 985 997 0852
ir@comstar-uts.ru

^[1]Up to June 22, 2010.

^[2]All US dollar amounts presented in this press release are based on the RUR/USD exchange rate of RUR 30.7267 per USD 1 as of June 22, 2010.

^[3]Holders of Comstar GDRs who do not wish or are not permitted under their local law to receive MTS shares in connection with the merger will receive the cash proceeds from the sale of the MTS shares to which they would have been entitled net of applicable fees, expenses and taxes, and subject to any adjustment for currency exchange rate fluctuations.

^[4] For illustrative purposes only and based on the MTS and Comstar RAS financial statements for the first quarter of 2010 and the respective repurchase prices set by the two companies, MTS shareholders would be able to sell back up to 2.4% of MTS’s total shares outstanding, and Comstar shareholders would be able to sell back up to 6.1% of Comstar’s total shares outstanding.