Moscow, Russia - December 21, 2006 - Sistema (LSE: SSA), the largest private sector consumer services company in Russia and the CIS, today announced its unaudited consolidated US GAAP financial results for the third quarter and nine months ended September 30, 2006.

HIGHLIGHTS FOR THE THIRD QUARTER OF 2006

·         Consolidated revenues up 39% year on year to US$ 2.9 billion

·         OIBDA up 56% year on year to US$ 1.4 billion

·         Operating income up 72% year on year to US$ 1.0 billion

·         Net income up 142% year on year to US$ 500.0 million

·         Earnings per share up 143% year on year to US$ 52.05

HIGHLIGHTS FOR THE NINE MONTHS OF 2006

·         Consolidated revenues up 38% year on year to US$ 7.5 billion

·         OIBDA up 31% year on year to US$ 3.0 billion

·         Operating income up 35% year on year to US$ 2.1 billion

·         Net income up 87% year on year to US$ 810.1 million

·         Total consolidated assets up 54% year on year to US$ 18.5 billion

·         Earnings per share up 83% year on year to US$ 84.21

Alexander Goncharuk, President and Chief Executive Officer of Sistema, commented: "The successful results of the third quarter prove our commitment to consistent and diligent deliverance on the promises made to the investment and business community in the beginning of this year".

FINANCIAL SUMMARY

(US$ millions)	Q3 06	Q3 05	Year on Year Growth	9M 06	9M 05	Year on Year Growth
Revenues	2,863.2	2,058.2	39%	7,461.2	5,418.2	38%
OIBDA OIBDA Margin	1,370.0 48%	880.4 43%	56%	3,023.0 41%	2,302.3 43%	31%
Operating income Operating Margin	1,054.4 37%	612.2 30%	72%	2,093.0 28%	1,553.4 29%	35%
Net Income Net Margin	500.0 17%	206.6 10%	142%	810.1 11%	434.2 8%	87%

OPERATING REVIEW

Sistema's consolidated revenues increased by 39% year on year in the third quarter to US$ 2,863 million and by 38% to US$ 7,461 million for the nine months of 2006, as a result of robust performance by the Group's Telecommunications segment and healthy growth of the Group's non-telecommunications operations. The non-telecommunications businesses accounted for 27% of Group consolidated revenues in the third quarter and 28% for the year to date, compared to 20% and 21% for the corresponding periods of 2005. The organic year on year and like for like growth was 33% in the quarter and 31% for the first nine months period, and amounted to US$ 2.8 billion in the third quarter of 2006 and to US$ 7.0 billion for the year to date, excluding businesses acquired or divested since the end of the third quarter of 2005. 

Group OIBDA increased by 56% year on year in the third quarter, and by 31% year on year from US$ 2.3 billion to US$ 3.0 billion for the nine month period. The Group's OIBDA margin increased from 43% to 48% in the third quarter, which reflected the reduction in the cost structure of MTS and a one off gain from sale of a subsidiary holding 35% interest in Sistema-Invest, the owner of the Group's energy companies in the Republic of Bashkortostan, for a total cash consideration of US$ 201.0 million. Group OIBDA margin for nine months period declined slightly from 43% to 41% as a result of lower margin in the Telecommunications, Technology, Insurance and Retail segments, partially offset by the recognition of gain on disposal of 35% share in Sistema-Invest (the holder of investments in Bashkortostan energy companies) of US$ 175.0 million.

Group operating income was up 72% year on year in the quarter from US$ 612.2 million to US$ 1,054.4 million, and by 35% from US$ 1.6 billion to US$ 2.1 billion for the nine months period. The operating margin in the third quarter was 37%, compared to 30% a year ago and was 28% for the nine months period, compared to 29% for the corresponding period of last year.

Consolidated depreciation and amortization expense was up by 18% year on year in the quarter and by 24% for the nine months period, following the growth in the Group's depreciable asset base, and change in estimate for the useful lives of analogue equipment of Comstar UTS in amount of US$ 6.4 million for the nine months of 2006.

Selling, General and Administrative expenses rose by 25% for the quarter and by 47% for the first nine months, from US$ 354.3 million to US$ 443.3 million and from US$ 928.7 million to US$ 1,368.2 million, respectively. US$ nil in the quarter and US$ 94.0 million for the nine months of 2006, included in S,G&A expense, reflects the fair value of non-cash compensation received by employees.

The effective tax rate increased from 29% to 30% for the year to date, as a result of foreign gains on the exchange of non-ruble denominated long term debt.

The increase in minority interest reflects changes both in net income of the Group and ownership's share in the Group's companies.

Net income in the third quarter was up 142% year on year to US$ 500.0 million from US$ 206.6 million. For the nine-month period, the net income growth was 87% from US$ 434.2 million to US$ 810.1 million.

The weighted average number of shares outstanding increased from 9,417,216 in the nine-month period of 2005 to 9,619,638 in the same period of 2006, while on a quarter-to-quarter basis the average number of shares decreased from 9,650,000 to 9,605,436 following the purchase of own stock by the Group. The Group reported a 143% year on year increase in basic and diluted earnings per share from US$ 21.41 to US$ 52.05 in the quarter and 83% increase from US$ 46.11 to US$ 84.21 for the nine month period.

Telecommunications[1]

(US$ millions)	Q3 2006	Q3 2005	Year on Year Growth	9m 2006	9m 2005	Year on Year Growth
Revenues	2,081.9	1,614.6	29%	5,379.3	4,294.6	25%
OIBDA	1,116.0	857.5	30%	2,667.1	2,240.5	19%
Operating Income	816.6	587.2	39%	1,770.6	1,507.7	17%
Net Income	557.0	397.2	40%	1,127.9	1,018.0	11%

The Telecommunications segment, which includes MTS and Comstar UTS, reported 29% year on year revenue growth to US$ 2,081.9 million in the third quarter of 2006 and 25% year on year increase to US$ 5,379.3 million for the nine month period, and accounted for 73% of the Group's consolidated revenues in the quarter, compared to 79% a year ago. The growth was primarily organic with no scale acquisitions made during the quarter with the exception of Dagtelecom, which contributed US$ 8.6 million to MTS's revenues. MTS continued to be the main contributor to the segment revenues and accounted for 88% of the segment's year on year growth in the quarter.

MTS added 3.5 million subscribers during the third quarter of 2006 as a result of the organic growth in its business, and reported 30% year on year revenue growth for the period from US$ 1.4 billion to US$ 1.8 billion. The mobile operator added 9.4 million subscribers during the first nine months of 2006. Revenues for the first nine months of 2006 increased by 24% year on year to US$ 4.6 billion from US$ 3.7 billion.

MTS results for the third quarter of 2006 showed a year on year decrease in average monthly service revenue per subscriber ("ARPU") for the Russian customer base from US$ 9.0 to US$ 8.6 (including all network revenue). Compared to the first quarter of 2006, MTS' ARPU increased from US$ 6.6 to US$ 8.6.

Comstar UTS generated 34% year on year revenue growth in the third quarter and 30% growth for the nine month period, from US$ 217.4 million to US$ 291.8 million and from US$ 636.8 million to US$ 828.2 million, respectively, reflecting robust growth in organic revenues, as well as US$ 26 million contribution received by MGTS from the federal budget for the discounts granted to certain categories of residential subscribers of MGTS prior to January 1, 2005 and US$ 15.7 million from the introduction of CPP ("Calling Party Pays") on July 1, 2006.  Data and internet services to residential users were up 32% year on year and accounted for 87% of total residential revenues of the alternative segment for the quarter and 82% for the nine month period. 

Segment OIBDA was up 30% year on year in the quarter and up 19% for the nine month period, with OIBDA margin of 54% in the third quarter and 50% for the nine months period, resulting from significant growth in operations. MTS' OIBDA in the third quarter increased by 29% quarter on quarter from US$ 754.9 million to US$ 976.8 million[2]. OIBDA for the nine month period increased by 18% from US$ 2.0 billion to US$ 2.3 billion. OIBDA margin increased by 5% from 49% in the second quarter to 54% in the third quarter as a result of the cost reduction programme and new marketing initiatives, introduced by the management during the period. Comstar UTS reported a 19% increase in OIBDA from US$ 96.2 million to US$ 114.6 million in the quarter and a 24% increase for the nine month period, from US$ 269.8 million to US$ 333.3 million. 

The year on year increase in segment net income was due to the higher contribution from MTS of US$ 486.3 million (US$ 347.2 million in 2005) in the third quarter and of US$ 965.4 million (US$ 883.8 million) for the nine month period as a result of improved underlying performance of the company. Comstar UTS meanwhile reported net income increase in the third quarter and for the nine month period, from US$ 34.2 million to US$ 48.3 million and from US$ 83.8 million to US$ 145.7 million, respectively.

Technology 

(US$ millions)	Q3 2006	Q3 2005	Year on Year Growth	9m 2006	9m 2005	Year on Year Growth
Revenues	349.0	226.2	54%	1,045.6	652.8	60%
OIBDA	28.9	35.3	-18%	109.5	150.7	-27%
Operating Income	12.6	33.3	-62%	75.0	143.2	-48%
Net Income	3.1	10.0	-68%	36.9	74.5	-50%

The Technology segment of Sistema, which includes Sitronics, generated 54% growth year on year in revenues to US$ 349.0 million in the third quarter and 60% increase year on year to US$ 1,054.6 million for the nine month period, and accounted for 10% and 11%, respectively, of Group revenues in 2006, compared to 7% and 8%, respectively, for the same periods of 2005. The growth was primarily organic. The acquisition of Intracom Telecom contributed US$ 306.1 million in revenues and US$ 22.5 million in OIBDA to the segment results. Following the acquisition of Intracom Telecom SITRONICS margin slightly decreased reflecting a lower margin of the new subsidiary's business. The growth was primarily driven by Telecom Solutions division.

SITRONICS is currently re-evaluating the accounting treatment of certain contracts with Group companies to apply a more conservative approach to recognition of revenue from sales of its own software products. This approach implies an extended period of revenue recognition of the transaction, including the period of warranty services. We do not expect that the results of this re-evaluation will materially impact Sistema consolidated accounts.

Real Estate

(US$ millions)	Q3 2006	Q3 2005	Year on Year Growth	9m 2006	9m 2005	Year on Year Growth
Revenues	54.6	18.5	195%	161.1	35.5	353%
OIBDA	15.5	7.3	113%	60.0	11.2	433%
Operating Income	13.0	5.2	150%	55.7	8.4	561%
Net Income / (loss)	24.7	(2.0)	-	34.0	1.4	2293%

The Real Estate segment, which includes Sistema Hals, reported almost five-fold revenue growth year on year to US$ 161.1 million in the nine months of 2006. Its revenues almost doubled year on year to US$ 54.6 million in the third quarter. This growth in revenues for the nine months of 2006 resulted primarily from sale of "Pokrovka" project, an office and hotel building in the center of Moscow, for US$ 84.4 million and "Yartsevskaya 27" project, residential premises in Moscow, for US$ 20.3 million, as well as US$ 10 million increase in revenues of Sistema Hals construction projects documentation subsidiary.

OIBDA has more than doubled year on year to US$ 15.5 million in the third quarter and increased more than five fold year on year to US$ 60.0 million from US$ 11.7 million a year ago for the first nine months of 2006. The increase in profitability was a result of contribution to OIBDA on the sale of "Pokrovka" project in the amount of US$ 41.6 million and recognition of profit from sale of a part of "Yartsevskaya 27" project for US$ 9.1 million. Revenues on the construction-type contracts were recognized using the percentage of completion method, used for accounting for long-term contracts. Progress towards completion is measured by percentage of costs incurred to date to the estimated total costs at completion for each contract, while revenues only start to be recognized upon conclusion of the agreement for sale.

Insurance

(US$ millions)	Q3 2006	Q3 2005	Year on Year Growth	9m 2006	9m 2005	Year on Year Growth
Revenues	163.4	121.0	35%	444.2	318.9	39%
Gross Premiums Written	187.8	120.1	56%	598.8	438.0	37%
Net Premiums Earned	147.8	104.0	42%	403.6	287.2	41%
Net Income	6.1	11.6	-48%	23.4	19.5	20%
Key Ratios
Loss ratio	59%	47%		56%	54%
Expense Ratio	38%	39%		39%	38%
Combined Ratio	97%	87%		94%	91%

The Insurance segment, which includes ROSNO, increased revenues by 35% year on year to US$ 163.4 million in the third quarter and by 39% year on year in the nine months of 2006. The growth was primarily driven by significant increase in motor vehicle insurance premiums Gross premiums written (GPW) increased by 56% year on year to US$ 187.8 million in the third quarter and by 37% year on year to US$ 598.8 million for the nine month period. Voluntary medical insurance premiums were up 67%, automotive insurance premiums increased by 126%, and non-life insurance premiums rose by 93% in the third quarter. The operations of new joint venture VTB-ROSNO added US$ 11.9 million to GPW and US$ 4.7 million in revenue for the nine months period ended September 30, 2006.

Allianz-ROSNO Asset Management increased its assets under management year on year from US$ 396.7 million to US$ 434.6 million in the third quarter, which was primarily driven by strong growth in third party funds.

Banking

(US$ millions)	Q3 2006	Q3 2005	Year on Year Growth	9m 2006	9m 2005	Year on Year Growth
Revenues	56.0	31.5	78%	143.8	77.3	86%
OIBDA	7.0	6.4	9%	16.8	10.6	58%
Operating Income	6.4	6.3	1%	15.0	9.5	58%
Net Income	3.1	4.0	-21%	6.9	5.2	33%

The Banking segment of the Group, which includes The Moscow Bank for Reconstruction and Development (MBRD), reported 78% increase year on year in revenues to US$ 56.0 million in the third quarter and US$ 143.8 million in revenues for the nine month period, a 86% growth year on year. The bank's loan portfolio doubled and interest income received from the retail banking operations has grown to US$ 15.0 million in the nine months of 2006. The bank increased its interest income from non-Group clients following the expansion of its retail business to 11 branches and 115 mini-offices. The activities of leasing companies contributed US$ 7.2 million to the segment's revenue for the nine month period.

Operating income and net income grew in absolute terms in the third quarter of 2006 and year to date, while the operating and net income margins have declined year on year as a result of growth in retail points. 

Retail

(US$ millions)	Q3 2006	Q3 2005	Year on Year Growth	9m 2006	9m 2005	Year on Year Growth
Revenues	82.3	58.0	42%	200.2	103.1	94%
OIBDA	4.7	1.3	262%	-2.8	6.0	-
Operating Income	3.6	0.9	300%	-4.7	4.7	-
Net Income	2.9	(0.5)	-	-6.9	1.8	-

The Retail segment of the Group, which includes Detsky Mir, the specialist children's goods retailer, increased its revenues by 42% year on year in the third quarter to US$ 82.3 million and by 94% year on year to US$ 200.2 million for the year to date. The organic revenue growth resulted from the opening of fifteen new retail stores during the nine months of 2006. These stores contributed US$ 33.9 million in sales, or 17% of total revenues for the first nine months of 2006. S-Toys, the wholesaler of consumer goods, accounted for US$ 21.7 million, or 26% of the segments's total revenues in the third quarter of 2006 and for US$ 30.5 million, or 15% of revenues in the nine months period of 2006.

The Company's profitability was adversely affected during the first half of 2006 due to the expansion of its retail network: Detsky Mir now has 58 stores in 21 cities of Russia, compared to 34 stores a year ago. The growth in retail network will enable the company to benefit from the increased purchasing and sales power, and will allow it to secure the footprint in the prime segment of the retail market.

Media

(US$ millions)	Q3 2006	Q3 2005	Year on Year Growth	9m 2006	9m 2005	Year on Year Growth
Revenues	19.9	14.5	37%	65.5	56.7	16%
OIBDA	3.1	3.6	-14%	13.0	0.9	1,344%
Operating Income /(loss)	0.8	2.2	-64%	3.6	(1.6)	-
Net Income/(loss)	4.4	0.2	2,100%	4.2	(3.5)	-

The Media segment reported 37% year on year increase in revenues to US$ 19.9 million in the third quarter of 2006 and 16% year on year growth to US$ 65.5 million for the nine month period. United Cable Network, which was acquired in February 2006, contributed US$ 34.9 million in revenues for the nine-month period ended September 30, 2006. US$ 14.5 million of the segment's revenues for the third quarter 2006 and US$ 34.9 million for the nine months of 2006 were generated by companies acquired since the third quarter of 2005, whilst US$ 6.7 million of revenues for the first nine months of 2005 were generated by companies, which were subsequently sold or transferred to other segments within the Group

The operating income of the segment decreased by US$ 1.4 million year on year in the third quarter as a result of US$ 3.3 million one off gain from the disposal of subsidiaries (Radio Center, Nasha Pressa, Stolichnaya Pressa and Metropressa) in the third quarter of 2005. The operating income grew by US$ 5.2 million year on year during the first nine months of 2006 primarily due to the increase in profitability of its Ukrainian subsidiary, Maxima Kiev, by US$ 1.6 million, the disposal of Sistema Multimedia business, which generated US$ 5.1 million loss for the first nine months of 2005, and gain of US$ 1.2 million from the disposal of Gazeta Metro. United Cable Network contributed US$ 1.2 million to the segment's operating income in the nine months 2006.

FINANCIAL HIGHLIGHTS

Net cash provided by operating activities during the third quarter of 2006 was down 13% to US$ 661.8 million year on year and down 1% to 1,339.6 million year on year during the first nine months of 2006. The reduction in the Group's operating cash flows was primarily related to the increase of MBRD's loan portfolio to non-Group entities.

Net cash used in investing activities was US$ 1,183.7 million in third quarter and US$ 3.2 billion for the year to date, and included capital expenditures of US$ 705.9 million in the third quarter and US$ 1,712.7 million for the year to date, compared to US$ 611.7 million and US$ 1,593.3 million, respectively, a year ago. The Group spent US$ 78.0 million in the third quarter and US$ 472.9 for the nine-month period on purchases of businesses.

Cash flow from financing activities amounted to US$ 199.5 million in the third quarter and US$ 2,232.2 million for the nine months of 2006, which primarily reflected proceeds of US$ 977.0 million received from the initial public offering of Comstar UTS, which took place in February 2006, and additional debt raised by the Group.

The Group's net debt amounted to US$ 5.0 billion at the end of the third quarter 2006, compared to US$ 2.6 billion as at September 30, 2005 and US$ 3.9 billion as at December 31, 2005. The Group's increase in borrowings included US$ 285.0 million of consolidated debt as a result of the acquisition of Intracom Telecom, US$ 160.0 million received from the bond offering of MBRD in March and June 2006, and US$ 200.0 million raised by the Sitronics Finance from the bond placement in February 2006, as well as additional financing attracted by MTS.

ACQUISITIONS AND DIVESTITURES

In June 2006, Sitronics acquired 51% voting stake of Intracom Telecom, a provider of telecommunications solutions and services in the Eastern Europe and Middle East. The total cash consideration for the deal was US$ 150.6 million, including US$ 43.9 million payable upon the completion of due diligence. Additionally, Sitronics entered into a put option agreement to acquire the remaining 49% of Intracom Telecom stock.

Sitronics registered an additional 293,476,990 common shares with a par value of 1 RUR each, representing 3.67% of outstanding capital. In September 2006, Sitronics signed a definitive agreement for the sale of these shares to the European Bank for Reconstruction and Development (EBRD) for US$ 80.0 million.

In July 2006, MTS acquired a 75% controlling stake in Dagtelecom from Glaxen Corp. for US$ 14.7 million. Dagtelecom is the GSM-900 mobile services provider with 1.7 million subscribers in the Republic of Dagestan, in the south of Russia, with a population of 2.6 million people. 

Comstar UTS announced an unconditional purchase offer for MGTS ordinary shares in December 2005.  Comstar UTS acquired 3,363,332 MGTS shares during the first two months of 2006, equivalent to 4.21% of the outstanding ordinary shares, for a total cash consideration of RUR 1.6 billion (equivalent to US$ 59.1 million as at June 30, 2006).  Comstar UTS purchased an additional 3.82% of MGTS common stock from minority shareholders for US$ 71.5 million in March 2006.  As a result, Comstar UTS's voting and economic interests in MGTS have increased to 53.0%.

Comstar UTS acquired 100% of Astelit, an alternative fixed-line telecommunications company, for US$ 7.8 million in June 2006.  Astelit holds licenses for provision of integrated fixed-line services across 51 Russian regions to large corporate customers, and has over 200 km of own fiber optic infrastructure in city centres.  Astelit has subsequently been rebranded as M-Telecom.

In July 2006, Intourist Overseas Limited purchased a 51% stake in Tatilya Turizm Seyahat Insaat, a Turkish travel operator, for US$ 0.3 million.

ROSNO acquired a 51% stake in Medexpress, a provider of voluntary medical insurance in the North-Western region of the Russian Federation, for US$ 6.6 million in January 2006.  The Group plans to further develop the operations of Medexpress and distribute ROSNO products through its network.

Sistema Mass Media and ECU GEST acquired 90% and 10%, respectively, of JIR Broadcast and JIR Inc., the owners of 100% of United Cable Networks, for a total cash consideration of US$ 145.9 million in February 2006. UCN is a pay-TV and broadband service provider with 724,000 subscribers in 17 metropolitan areas across the Russian Federation. Sistema Mass Media sold its ownership in Gazeta Metro in June 2006 for US$ 1.9 million.  Sistema Mass Media acquired GK Sendi, an internet provider in Nizhny Novgorod, and Informservis, a cable television operator in the same region, for US$ 6.3 million in January 2006. The Group intends to use these operations to further develop its digital TV and broadband networks in the regions.

Detsky Mir completed the acquisition of 99% of Tireks Development, the owner of 30% stake in the subsidiary of the Group - Dom Igrushki - for a cash consideration of US$ 2.4 million in March 2006.

Intourist purchased a 20% equity interest in Cosmos Hotel for approximately US$ 20.8 million in March 2006. It now has a controlling interest in Cosmos Hotel of 63.4%. 

Concern RTI acquired a 50% plus one share interest in UralEleketro, and a 100% stake in UralElektro-K, for a total cash consideration of US$ 5.4 million in March 2006. Both companies manufacture electronic equipment.

In August 2006, the Group acquired a 81.25% stake in ZAO Sahles, the owner of controlling stakes in the entities that together comprise the Perm Motors Group, for US$ 122 million. Perm Motors is one of Russia's largest manufacturers of jet aircraft engines and industrial turbines.

In July 2006, the Group disposed of Glorely, a subsidiary holding 35% interest in Sistema-Invest, the owner of the Group's energy companies in the Republic of Bashkortostan, for a total cash consideration of US$ 201.0 million.

In the third quarter of 2006, Sistema Mass Media acquired several cable television operators in a number of Russian regions, including 74% stake in Smolensk-based "Teleradiotekhnika" for US$ 1.2 million, 100% of Voronezh-based "Elecom-service" for US$ 1.0 million, 100% of "Telesat" located in Nizhny Tagil for $0.4 million, 74% share in a group of operators based in Ivanovo for US$ 7.1 million, 55% stake in "Electronica" in Balakovo for $0.8 million and 90% of "Sallak" based in Krasnodar for US$ 0.2 million. These acquisitions were in line with the Group's strategy of growing its regional presence in the cable television market.

In August 2006, the Group sold 8% stake in MTK ("KOMKOR") together with an additional 3% acquired from a related party after June 30, 2006 for US$ 20.0 million.

 RECENT EVENTS FOLLOWING THE END OF THE REPORTING PERIOD

In December 2006, Comstar UTS announced the acquisition of a blocking stake 25% plus one share in Telecommunication Investment Joint Stock Company (Svyazinvest) from Mustcom Limited for a total cash consideration of US$ 1.3 billion. The Company arranged a US$ 675 million six month loan facility with ABN AMRO Bank N.V. in connection with this transaction. The interest rate was fixed at 1.2% above LIBOR. The term of the loan can be extended to twelve months.

In December 2006, the EGM of Comstar UTS elected Mr. Ditmar Kunt and Mr. Yngve Redling as independent members of the Board of Directors. Simultaneously the EGM elected Mr. Eric Franke and Mr. Shamil Kurmashov to the Board and reelected five of its existing Board members. The Board has reelected Mr. Sergei Shchebetov, Chief Executive Officer of Sistema Telecom, as the Chairman of the Board of Directors of Comstar UTS.

In December 2006, Comstar UTS announced that it has reached an agreement with Intracom Holdings (ASE:INTRK) to subscribe to a 51% stake in Hellas On Line SA (HoL) for a cash consideration of ? 47.9 million. The closing of the transaction, which is subject to certain conditions precedent including approval of Greek regulatory authorities, is expected  during the first quarter of 2007.

In November 2006, Comstar UTS purchased regional licenses for provision of WiMAX-based services in the range of 5.4 - 5.7 GHz through a regional tender in Kiev, Kiev region, Odessa, Odessa region, Lvov and Lvov region. The total cost of this license was approximately US$ 0.8 million.

In November 2006, Comstar UTS entered into agreements granting stock bonuses in the form of shares (GDRs) for the total of 8,776,757 (2.10% of total issued shares) to certain members of its Board of Directors. Per one of these agreements, on December 1, 2006 Comstar UTS transferred 2,507,645 shares in the form of GDRs (0.60% of total issued shares) to Mr. Schebetov, Chairman of the Board of Directors. Market value of this award as of the grant date was approximately US$ 17.8 million.

In November 2006, Sistema Hals raised US$ 432 million (post greenshoe) in the initial public offering on the London Stock Exchange, which valued the Company at approximately US$ 2.1 billion. The offering represented around 18% of the total share capital post the IPO.

In November 2006, Standard & Poor's Ratings Services (S&P) raised Sistema's long-term debt rating to 'B+' from 'B'. The one-notch upgrade reflects the improvement in recent periods in the subordination of debt, issued by Sistema versus debt, issued by MTS.

In October 2006, Sistema acquired a 66% controlling stake through directed new share issue in WaveCrest Group Enterprises Ltd. ("WaveCrest") for cash consideration equivalent to GB? 20.0 million. WaveCrest is a global communications service provider offering wholesale (operator) and retail (residential) telephony services, using conventional circuit-switched and Internet protocol (IP) telephony.

In October 2006, Sistema has completed the purchase of 2% of its stock in the amount of approximately US$ 239 million. The purchase was completed through one of Sistema subsidiaries - Sistema Finance.

In October 2006, Sistema, through one of its subsidiaries, subscribed to a total of 167,131 ordinary shares at the offer price, which constitute 1.73% of the stock, offered by certain directors of the Company. The total subscription was in the amount of approximately US$ 207 million. Sistema plans to establish a share option programme for the top management of the Company. The acquired shares are intended for the funding of this programme, and may also be used in connection with certain future acquisitions.

In October 2006, Comstar UTS acquired 1,605,500 ordinary shares in MGTS. The acquired shares represented 2.01% of the MGTS' ordinary shares, or 1.68% of the MGTS' total shares. Upon completion of this transaction, Comstar UTS interest in MGTS amounts to 66.88% of MGTS' ordinary shares, or 55.73% of MGTS' total shares.

In October 2006, Comstar UTS purchased 75% stake plus one share in Callnet, a transit operator, and Cornet, an Internet Services Provider, which together represent the second largest alternative telecommunications group in the Republic of Armenia.

In October 2006, Comstar UTS signed a cooperation agreement between OJSC Sheremetyevo International Airport and CJSC PortTelecom, a 100% owned subsidiary of Comstar-UTS. The agreement covers a range of activities, including the development, construction and operation on a concessionary basis of a modern broadband and multimedia telecommunications network on the airport territory.

In October 2006, Comstar UTS acquired 100% stake in two telecom operators in Kiev, Ukraine - DG Tel and Technologic Systems - through its local subsidiary Comstar - Ukraine for a total cash consideration of US$ 4.7 million.

In December 2006, Intourist purchased 51% stake in a number of companies comprising Riviera Holding, a tourist operator in Saint Petersburg. Riviera Holding serves approximately 120,000 tourist annually and operates in over than 20 countries of the world.