OREANDA-NEWS. November 20, 2007. “COMSTAR – United TeleSystems” JSC (“Comstar” or “the Company”) (LSE: CMST) announced that it has completed the acquisition of 100% of the share capital of Digital Telephone Networks South (“DTN”), the largest alternative telecommunications operator in the Southern Federal District of Russia, for a total cash consideration of RUB 4,1 billion (approximately US$ 167,4 million), reported the press-centre of Comstar.

DTN owns a digital telephone network which operates under a zonal license in Rostov-on-Don and the Rostov region. The Company also operates in Krasnodar through its telecom subsidiary Comtel, which was acquired in July 2007. DTN provides a full range of telecommunication services, including digital telephony, leased channels and Internet access, to residential and corporate subscribers.

DTN services over 155,000 telephone numbers, including more than 125,000 numbers for residential subscribers and around 30,000 numbers for corporate clients, in Rostov-on-Don, Taganrog, Shakhty, Azov, Belaya Kalitva, Kamensk-Shakhtinsky and Gukovo, as at  September 30, 2007.

The Company reported revenues of US$ 41,8 million increasing by 56% year-on-year, OIBDA of US$ 22,3 million with an OIBDA margin of 53%, and net income of US$ 14,3 million for the nine months ended September 30, 2007. Revenue growth was primarily driven by an over 80% year on year increase in revenues from both broadband Internet services and zonal traffic, as well as the acquisition of Comtel.

The favourable geographical position of DTN in the Rostov-on-Don regional business centre and the wider Rostov region provides strong development potential for Comstar in the Southern Federal District. According to Comstar’s estimates, the fixed-line services, Internet connection and data transmission market in the Rostov region is expected to grow by over 23% in cash equivalent in 2007. The combined efforts and market experience of the existing Southern branch of Comstar and the acquired DTN will assist Comstar in creating synergies, which will provide subscribers with a full range of integrated telecommunications services, reduce combined operating expenses, optimize business processes and create economies of scale.

Sergey Pridantsev, President and Chief Executive Officer of Comstar UTS, commented: “Digital Telephone Networks is the largest independent alternative operator in Russia with higher profitability than the industry average. The acquisition of DTN is in line with our regional growth strategy of consolidating local market leaders. It will have a positive impact on the financial results of Comstar-UTS Group and help us to strengthen our leading position in the highly attractive alternative telecommunication market in the Southern region of Russia.”