Moscow, Russia – May 26, 2009 – “COMSTAR – United TeleSystems” OJSC (“Comstar” or “the Group”) (LSE: CMST), the largest integrated telecommunications provider in Moscow and 69 Russian cities, today announced its unaudited consolidated US GAAP financial results for the three months ended March 31, 2009.

First quarter highlights

• Consolidated revenues up 12% year on year in ruble terms to US$ 334.4 million 

• OIBDA  up 4% year on year in ruble terms to US$ 126.4 million and OIBDA margin of 37.8%

• Underlying net income attributable to Comstar-UTS declined 8% year on year in ruble terms to US$ 38.8 million when excluding foreign exchange losses 

• Cash flow from operations of US$ 99.2 million

• Cash capital expenditure  of US$ 59.7 million

• Total assets of US$ 3.4 billion

• Residential broadband ARPU in Moscow up 5% quarter on quarter to RUR 323

Delivery in line with strategic goals

• Test launch of Mobile WiMAX network in Moscow & full commercial launch on May 1, 2009

• Rated number one broadband internet provider in Moscow in terms of customer loyalty

• Commenced extensive restructuring of regional assets to be legally merged and consolidated under Comstar Regions CJSC

• Completion of acquisition of STREAM-TV Group of regional operators

• Anti-crisis broadband internet limited tariff plans launched in Moscow

• Average 8% increase in MGTS regulated ruble tariffs from March 1, 2009

• Average 12% increase in ruble tariffs for unregulated services in Moscow from March 1, 2009

• 40% increase in regulated per minute ruble charge for operators interconnected to Comstar network in Moscow from the second quarter of 2009

Sergey Pridantsev, President and Chief Executive Officer, commented: “The results for the first quarter again demonstrate the resilient nature of our business in challenging market conditions. The business performed well over the period and we have continued to deliver on the objectives set out in our five year “Five Angles of Attack” strategy. The investment case remains the same but the strategic priorities for this year have been modified to meet the challenges presented by the current environment – to ensure financial stability by maximizing cash flows and optimizing investments, in order to service and repay debt, and to focus on maintaining and developing the existing subscriber base and integrating the regional assets.”

Irina Matveeva, Chief Financial Officer, added: “Our primary focus in 2009 remains to increase the utilization of our existing capacity. We still expect total 2009 CAPEX to represent approximately 6% of Group revenues and to comprise maintenance CAPEX, investments in subscriber acquisition and up-selling, and selective regional development projects. The majority of these projects are planned for the first half of the year, with lower levels of investment currently planned for the second half of the year. CAPEX represented 18% of revenues in the first quarter and included the payments for the projects implemented during 2008.”

“We expect to generate low single digit percentage point organic ruble revenue growth in 2009. This growth will primarily be driven by the regulated and non-regulated tariff increases from the beginning of March. The normalised long-term OIBDA margin for our business is 35-40%. The 2009 Group OIBDA margin will be impacted by the consolidation of the lower margin STREAM-TV business and the economic downturn, which will be offset to an extent by the tariff increases, and continues to be subject to seasonal fluctuations.”

Consolidation and Combination of STREAM-TV

In accordance with the provisions of FASB Statement No. 141 “Business Combinations” and FASB Statement No. 154 “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and FASB Statement No.3”, and given that Comstar and Sistema Mass Media are commonly controlled, the Group’s consolidated financial information for the periods prior to the acquisition of STREAM-TV Group shall be restated as if STREAM-TV had been owned and consolidated in the prior periods. Scrutiny and restatement of STREAM-TV quarterly financial information to conform it to Comstar accounting policies is currently underway, therefore, comparative financial information for the respective quarters of 2008 is presented in this report as it was reported in 2008, which is a departure from US GAAP. Management expects to eliminate this departure when reporting 2009 full year results.

Net income (Noncontrolling interests)

Until December 31, 2008, Comstar reported net income attributable to noncontrolling interest as a deduction in arriving at consolidated net income. With effect from January 1, 2009, Comstar has adopted the new mandatory provisions of FASB Statement No. 160 (As Amended) “Noncontrolling Interests in Consolidated Financial Statements”, which requires that consolidated net income be reported to include the amounts attributable both to the parent and to the noncontrolling interest. Comstar has therefore reported net income before the amounts attributable to the noncontrolling shareholders of its subsidiaries, and the latter amounts (previously referred to as “minority interests”) are separately disclosed. All comparative financial information has been restated in accordance with this new policy.