Moscow, Russia – August 12, 2005 – Sistema (LSE: SSA), the largest private sector consumer services company in Russia and the CIS, announced today that it has acquired minority shareholdings in seven energy companies in the Republic of Bashkortostan in the Ural Mountains, for a total cash consideration of US$ 502.9 million.

Sistema has acquired 19.9% of the shares of each of OAO Novoil, OAO Ufimsky NPZ, OAO Ufaneftekhim, OAO ANK Bashneft and OAO Ufaorgsintez; 18.57% of OAO Bashnefteproduct; and 10.08% of OAO Bashkirenergo (the “Companies”). All seven Companies are listed on the Russian Trading System (RTS) stock exchange in Russia. Sistema intends to increase its stakes in some of the Companies to constitute blocking minorities in the near future.

The shares have been acquired from OOO Bashkir Capital, which owns majority stakes in each of the Companies, with the exception of Bashkirenergo. Bashkir Capital approached Sistema with a view to capitalise on Sistema’s extensive experience and expertise in business restructuring. Sistema and Bashkir Capital intend to work together to build a modern, transparent and vertically integrated holding company, in order to maximize the value of the Companies and the entire holding through the implementation of best practice corporate governance, business process engineering and corporate finance activities.

The Companies together comprise the majority of the energy sector in the region and are engaged in oil exploration and extraction, oil refining, petrochemical production and energy production and distribution. Taken as a whole, they are Russia’s third largest oil refiner. The Companies’ results are reported under Russian accounting standards and are not therefore comparable with Sistema’s consolidated accounts, which are reported according to US GAAP. The combined market value of the acquired equity stakes is over US$ 610 million. The acquisition price therefore represents a significant discount to the current market value of these assets.

Vladimir Evtushenkov, Chief Executive Officer of Sistema, commented: “These acquisitions will enable us to maximise the return on shareholders’ funds. This by no means indicates a departure from Sistema’s focus on our core consumer services operations and outlined investment projects. However, in the environment of uncertainty surrounding the Svyazinvest privatization, Sistema considers it appropriate to use existing funds, which are currently held in bank deposits, to finance this transaction. It is a purely financial investment and the acquisition cost will be refinanced in an appropriate manner in the near term”.

“Sistema’s business experience lies in the area of growing and developing companies. We have a long and successful track record of investing in companies and generating substantial returns, which has historically included a number of holdings in the oil and gas sector. Our ability to successfully consummate deals in this industry is exemplified by the acquisition and subsequent sale of a stake in Belkamneft in 2003. We intend to take an active advisory role in the strategic development of these businesses and then seek to exit the investments by selling the stakes to financial or strategic investors.”

OAO ANK Bashneft is an oil and gas exploration and extraction company. Based on the Russian ABC classification system, the company’s reserves in 2003 were estimated at 330 million tons. Bashneft produced 12.1 million tons of oil in 2004 and reported a 45% year on year increase in net sales to RUR 57,449 million (US$ 2,002 million) in 2004.

Ufaneftekhim is an oil refining company, which processed 6.2 million tons of oil, or about 3.2% of the total Russian oil output in 2004, up 3.9% from 2003. The total Company’s production constituted, respectively, approximately 5% and 4.3% of total Russian gasoline and diesel production in 2004 or 1.241 million tons and 2.655 million tons respectively. The Company reported revenues of RUR 10,711 million (US$ 373 million) for the twelve months ended December 31, 2004.

Ufimsky NPZ refined a further 6.3 million tons of oil in 2004, producing an additional 4% of standard quality and 8% of high quality Russian gasoline, as well as 6% of the country’s diesel fuel. This comprised 2.511 million tons, 1.150 million tons and 1.422 million tons of diesel, heating oil and standard quality gasoline respectively. The Company reported revenues of RUR 9,782 million (US$ 341 million) for the twelve months ended December 31, 2004.

Novoil is the third refining company and processed 5.8 million tons of oil, or 3% of the country’s total output in 2004. It produced 4% of Russian gasoline, 6% of high quality gasoline and 3% of Russia’s diesel and heating oil during the period, or 2.064 million tons, 1.183 million tons and 1.555 million tons of diesel, heating oil and standard quality gasoline respectively. The Company reported revenues of RUR 10,314 million (US$ 359 million) for the twelve months ended December 31, 2004.

Bashkirnefteproduct is one of Russia’s leading gasoline filling stations construction and operation companies. The Company buys, stores, wholesales and retails gasoline and other petroleum products. Bashkirnefteproduct reported revenues of RUR 8,526 million (US$ 297 million) for the twelve months ended December 31, 2004.

Bashkirenergo produces and distributes electricity and heating for petrochemical manufacturers and oil refineries, chemical, agricultural and transportation companies as well as residential customers, holding a 100% market share of local electricity supply and 80% of the heating distribution market.

Ufaorgsintez is the second largest Russian producer of polyethylene, with a market share of 10%, and controlling 40% of the Russian phenol market in 2004. The Company reported revenues of RUR 5,346 million (US$ 186 million) for the twelve months ended December 31, 2004.

Sistema’s management firmly believes that these transactions represent an effective use of its existing liquid funds and that it will be able to take advantage of rising oil prices, as well as the application of Sistema’s management expertise to maximum effect.