Sistema Initiates Consolidation of Its Fixed Line Telecoms Businesses.

MOSCOW -- Sistema (LSE:SSA), the largest private sector consumer services company in Russia and the CIS, announced today that it intends to restructure its fixed line telecommunications businesses as follows:

--Sistema's fixed-line telecommunications assets will be consolidated under Comstar UTS, a leading alternative fixed-line telecommunication company in the Moscow Region, which will be formed through a merger with Sistema's other fixed-line telecommunications subsidiaries MTU-Inform and Telmos. MTU Intel, an internet provider, will become a subsidiary of Comstar UTS.

--Sistema will transfer 56% of its shares in MGTS, the incumbent fixed-line telecommunication service provider in Moscow, to Comstar UTS in exchange for new shares in the combined entity.

The first legal steps in this consolidation process have been taken with the change in the legal status of closed joint stock company ZAO Comstar to open joint stock company OAO Comstar UTS and the acquisition of 20% stake in Telmos by Comstar UTS from Sistema.

Additionaly, Sistema's Board of Directors has called an Extraordinary General Meeting of Shareholders on October 21 to seek approval for the transfer of 56% of its shares in MGTS to OAO Comstar UTS in exchange for new shares in the combined entity.

For further information, please visit www.sistema.com.

Sistema is the largest private sector consumer services company in Russia and the CIS, with over 50 million customers. Sistema develops and manages market-leading businesses in selected service-based industries, including telecommunications, technology, insurance, banking, real estate, retail and media. Founded in 1993, the company reported revenues of US$ 5.7 billion for the full year 2004, and total assets of US$ 8.8 billion as at December 31, 2004. Sistema's shares are listed under the symbol "SSA" on the London Stock Exchange, under the symbol "AFKS" on the Russian Trading System (RTS), and under the symbol "SIST" on the Moscow Stock Exchange (MSE).

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Sistema. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might" the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to Sistema and its operations.