Comstar-United Telesystems OJSC Financial Results For The Third Quarter

Friday, November 28th, 2008 

MOSCOW, Russia — “COMSTAR – United TeleSystems” OJSC (“Comstar” or “the Group”) (LSE: CMST), the largest integrated telecommunications provider in Moscow and 66 Russian cities, today announced its unaudited consolidated US GAAP financial results for the third quarter and nine months ended September 30, 2008.

Sergey Pridantsev, President and Chief Executive Officer, commented: “The consolidation of STREAM-TV’s regional operations from the beginning of 2009 will add at over US$ 100 million to our top line, double our regional revenues, increase our total residential broadband subscriber base in Russia to over 1 million subscribers, and boost our pay-TV subscriber base to more than 2 million subscribers.”

Broadband in Moscow

The total number of broadband subscribers in Moscow increased by 70% year on year to 844 thousand in the quarter. The residential broadband subscriber base in Moscow grew by 75% year on year to 793 thousand customers. 22% of MGTS’ voice customers now subscribe for broadband services, compared to 13% in September 2007, and the objective is to increase this level to 33% by the end of 2011.

The number of premium subscribers in Moscow increased by 52% year on year to 688 thousand in the third quarter, and was stable quarter on quarter, in line with the increasingly high penetration levels in Moscow. Premium segment ARPU therefore decreased year on year and quarter on quarter in Rouble terms to RUR 300.6 (US$ 12.4) in the third quarter from RUR 328.4 (US$ 13.9) in the second quarter of 2008 and from RUR 479.6 (US$ 18.8) in the third quarter of 2007, in line with the higher number of subscribers in promotion price periods. The number of double-play (Internet & pay-TV) subscribers grew by 39% year on year to 147 thousand.

Broadband in the regions

Comstar’s regional residential broadband subscriber base grew by 57 thousand subscribers year on year to a total of 61 thousand subscribers by the end of the third quarter, up from 49 thousand subscribers at the end of the second quarter, which reflected both healthy organic subscriber growth as well as the inclusion of the subscriber bases of the businesses acquired since the end of the third quarter of 2007.

The number of pay-TV subscribers in the regions increased by 6% quarter on quarter to 150 thousand customers following new marketing campaigns by DTN in the Southern Federal District.

Enterprise value for acquisition of STREAM-TV Group set at US$ 250.0 million, of which approximately half is debt. Comstar plans to complete the acquisition by the end of 2008 and to start consolidating STREAM-TV from the date of completion. The acquisition will double the Group’s regional revenues, increase the Group’s residential broadband subscriber base in Russia to over 1 million subscribers and increase the pay-TV subscriber base to over 2 million subscribers.

Alternative segment in the Regions & CIS

Comstar commenced the integration of STREAM-TV Group’s regional operations in September. STREAM-TV is the largest pay-TV operator in Russia and provides cable TV and broadband internet access services in 40 Russian cities with a combined population of over 15 million people. The Group’s networks pass over 3.6 million households and have over 1.8 million active pay-TV subscribers and over 200 thousand broadband internet subscribers.

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