Telenor drops objection to Vimpelcom’s purchase of URS, gives hope to Kyivstar debacle?

27 Sep 2007

Norwegian telecoms group Telenor has announced that it has dropped a long-running legal case in which it objected to Vimpelcom’s 2005 purchase of mobile operator Ukrainian Radio Systems (URS, now rebranded under the Russian cellco’s Beeline trademark), reports the Moscow Times. However, Telenor said it would persist in seeking legal redress in other ongoing disputes with its Russian investment partner Altimo, the telecoms arm of conglomerate Alfa Group, which has a controlling stake in Vimpelcom. The dispute between Altimo and Telenor arose from differences over the strategy and control of Vimpelcom and Kyivstar, Ukraine’s largest mobile operator by subscribers. Altimo and Telenor own 37.7% and 26.6% respective stakes in Vimpelcom, whilst Telenor controls 56.5% of Kyivstar, with 43.5% of the company owned by Altimo; Vimpelcom owns 100% of URS. TeleGeography’s GlobalComms database notes that Alfa also has an indirect interest in another Ukrainian GSM operator, Astelit, through its stake in Turkey’s Turkcell, and a 40% stake in WiMAX provider Ukrainian High Technologies (UHT, Alternet), via its Russian Technologies venture fund, whilst Golden Telecom, which offers fixed and mobile services in both Russia and the Ukraine, is another regional player co-owned by the pair (Alfa 30%, Telenor 20%).

Vimpelcom spokeswoman Yekaterina Osadchaya yesterday welcomed Telenor’s decision, saying that it ‘vindicates our position that we were doing the right thing all along,’ whilst Altimo vice-president Kirill Babayev said his company would welcome future cooperation with Telenor. Relations between the two sides have deteriorated to the point that Telenor has been forced to omit Kyivstar’s results from its financial reports, and Altimo has consistently boycotted shareholder meetings at the Kyiv firm, which has been forced to operate without a board of directors. Telenor has called a Kyivstar shareholders meeting for next Monday to resolve corporate governance issues, including re-electing a board, although according to the Moscow Times, neither the Oslo-based group nor the Russian investor has expressed any confidence in an immediate breakthrough being reached. The paper said that Altimo had declined to confirm whether it would attend the meeting.

Telenor has filed a series of lawsuits in Russian courts against Vimpelcom’s USD231 million purchase of URS in an effort to invalidate the deal, on the grounds that the price was excessive and that it already had a presence in the country via Kyivstar, but all the legal bids failed. A New York arbitration court last month ordered Alfa to sell its stake in Kyivstar to a non-affiliated company within 120 days or to relinquish certain holdings in rival Ukrainian operators, but the jurisdiction of the court was questioned by the Russian company. Telenor’s head of Russian operations, Kjell Morten Johnsen, said in an interview given to Russian newspaper Vedomosti yesterday that his company is prepared to drop its ongoing legal actions against Altimo with respect to disputes over its jointly-held Ukrainian assets, if Altimo agrees to abide by the New York court ruling, and stop blocking attempts to elect a board of directors at Kyivstar.