Moscow, Russia – October 31, 2005 – Sistema (LSE: SSA), the largest private sector consumer services company in Russia and the CIS, announced today that its fixed-line telecommunications provider subsidiary Comstar UTS has acquired 89.4% of common shares and 31.9% of preference shares in Tyumenneftegazsvyaz, for a total cash consideration of US$ 7.8 million.

Tyumenneftegazsvyaz is a leading alternative fixed line provider which operates throughout the Tyumen region as well as in the autonomous districts of Khanty-Mansiysk and Yamalo- Nenets. In 2004 the company reported revenues of US$ 16.4 million and EBITDA of US$ 2.4 million. Corporate and residential customers account for 56% and 36% of the total revenues respectively. Tyumenneftegazsvyaz owns fibre-optic and radio-relay networks and currently services over 55,000 users; with installed capacity of 74,000 numbers.

Semyon Rabovsky, the CEO of Comstar UTS, commented: “The acquisition of Tyumenneftegazsvyaz is the next logical step in the geographical expansion of our business. The regions serviced by Tyumenneftegazsvyaz are oil producing areas characterised by one of the highest incomes per capita* after Moscow and St. Petersburg. Considering the growth potential and synergies with Comstar, I am certain that Tyumenneftegazsvyaz’s position in the region will be significantly strengthened as a result of this transaction”.

* Statistics of Goscomstat July 2005