OREANDA-NEWS. On 05 February 2009 “COMSTAR – United TeleSystems” JSC (“Comstar” or “the Group”) (LSE: CMST), the largest integrated telecommunications provider in Moscow and 69 Russian cities, announced that it has commenced the reorganisation of its regional operations, which will be consolidated under Comstar-Regions, Comstar’s 100% owned subsidiary to be created in the first half of 2009.

Comstar has completed the acquisition of the regional operators of STREAM-TV Group, which were owned by Sistema Mass Media (“SMM”), and provide pay-TV and broadband internet access services in 40 Russian cities with a combined population of over 15 million people. The companies were acquired for a total cash consideration of RUB 6.75 billion (approximately US\\$ 186.6 million based on the Russian Central Bank exchange rate as at February 3, 2009), following the receipt of approval from the Federal Antimonopoly Service of the Russian Federation.

Comstar’s current regional asset ownership structure comprises over 30 branches of Comstar and STREAM-TV Group, as well as around 80 subsidiaries, including STREAM-TV Group’s companies.

Within the framework of the reorganization, Comstar and STREAM-TV Group’s subsidiaries will be consolidated under Comstar-Regions by the end of 2009. As a result of consolidation, Comstar-Regions will comprise 6 enlarged branches in 6 macro-regions of Russia – Central, North-West, Southern, Volga, Ural and Siberian Federal Districts. Comstar expects to consolidate Comstar-Regions following the completion of the reorganisation.

Sergey Pridantsev, President and Chief Executive Officer of Comstar UTS, commented: “Comstar became a truly national multiservice telecommunications provider in 2008, and, therefore, fulfilled the promises given to the investment community at the time of its initial public offering on the London Stock Exchange. However, our goal is not only to make value-accretive acquisitions, but also to oversee an efficient development of the acquired assets. Our Group’s reorganisation, which is expected to be completed by the end of 2009, is aimed at increasing the transparency of our business and creating an efficient management structure. Our strategic goal is to transform the Group from the multi-branch operating holding structure to a unified operating company model.”

Viktor Koresh, Vice President for the Development of the Group’s Operations, added: “The restructuring is based on the “one Federal District – one branch” principal which is seen as the most efficient structure for streamlining the activities of our subsidiaries all over the country. The regional asset consolidation will enable us to eliminate the internal competition between Comstar and STREAM-TV Group companies and optimize our resources. The extracted synergies allow us to provide a full range of fixed-line telecommunications services, including local, zonal and long-distance connection, broadband internet access and pay-TV services, to corporate and residential subscribers nearly on the whole territory of Russia. We will continue to modernize our networks in 2009, and we will start introducing a unified brand in the regions where we are present.”