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Financial Corporation "Sistema"

October 5, 2005

Sistema announces terms of asset consolidation in its fixed-line telecommunications segment

Moscow, Russia – October 5, 2005 – Sistema (LSE: SSA), the largest private sector consumer services company in Russia and the CIS, today announced the terms of the proposed consolidation of its fixed-line telecommunications operators under Comstar United TeleSystems.

As previously announced, Sistema intends that Comstar UTS acquire and hold majority stakes in Sistema’s fixed-line businesses, including MTU-Inform, Telmos, MTU-Intel, Golden Line and MGTS. Comstar UTS will pay for these acquisitions in the form of newly issued shares.

The acquisition value of 55.62% ordinary shares of MGTS currently owned by Sistema was established by Comstar UTS at RUB 18,619,086,530. The aggregate acquisition value of 51% of MTU-Inform, 30% of MTU-Intel and 40% of Telmos owned by ZAO UTS MGTS (a 100%-owned subsidiary of MGTS), was established at RUB 5,654,173,600. The aggregate acquisition value of 48% of MTU-Inform, 70% of MTU-Intel and 40% of Telmos owned by ZAO UTS (a 100%-owned subsidiary of Sistema and Sistema Telecom), was established at RUB 7,025,738,748.

The value of 100% of Comstar UTS pre-consolidation (owned 50% by ECU Gest Holding, a 100% subsidiary of Sistema, and 50% by MGTS) was established at RUB 2,815,468,300. In order to acquire all of the aforementioned stakes, Comstar will need to issue 255,919,860 additional shares, which will increase Comstar UTS’ charter capital to 278,940,860 shares.

If the transactions are approved by the respective executive bodies, directors and shareholders of all legal entities involved, the additional issue of shares of Comstar UTS will be allocated as follows: Sistema will acquire 152,241,100 shares, ZAO UTS – 57,446,760 shares, ZAO UTS MGTS – 46,232,000 shares. Based on this calculation, it is expected that post-merger the shareholder structure of Comstar UTS will be as follows: Sistema and its 100%-owned subsidiaries will own 79.3% (Sistema – 54.58%, ZAO UTS – 20.59%, ECU Gest Holding – 4.13%), and MGTS and its 100%-owned subsidiary will own 20.7% (ZAO UTS MGTS – 16.57%, MGTS – 4.13%).

Comstar UTS has retained ZAO KPMG to perform the valuation of the stakes to be acquired, as well as to calculate the shareholder stakes in the merged entity, the value of the additional share issue and the swap ratio in Comstar UTS.




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