Norway’s Telenor, Russia’s Alfa group say they end legal battles, plan asset merger

By Steve Gutterman, AP
Monday, October 5, 2009

Telenor, Alfa end legal battle, plan asset merger

MOSCOW — Norway’s Telenor and Russian conglomerate Alfa Group said Monday they are ending their longstanding legal battles and combining their main mobile phone holdings in Russia and Ukraine into a single company, a deal Telenor’s CEO called a milestone.

Alfa Group and Telenor have been fighting for control of Russia’s No. 2 mobile operator, Vimpelcom, and have been entangled in court battles for years. The struggle has threatened to deprive Telenor of its 30 percent stake in Vimpelcom, raising concerns about the rule of law and the security of investments in Russia.

In a joint statement, Telenor and Altimo, the telecommunications arm of Russian billionaire Mikhail Fridman’s Alfa Group, said they have agreed to combine their holdings in Vimpelcom and Ukraine’s Kyivstar into a new jointly owned mobile operator called Vimpelcom Ltd.

Altimo will get 43.89 percent of the voting shares in the new company — about the same as it has in Vimpelcom today — and Telenor will get 35.42 percent, the companies said. Vimpelcom Ltd. is incorporated in Bermuda and will be headquartered in the Netherlands and listed on the New York Stock Exchange.

Altimo and Telenor said they will suspend all ongoing legal proceedings and seek to withdraw or settle them before the deal is completed, hopefully by mid-2010. Telenor CEO Jon Fredrik Baksaas called the agreement a “milestone.”

It came after Russian Prime Minister Vladimir Putin, whose country has been struggling with the worst economic crisis in a decade amid the global financial meltdown, courted foreign investment at a forum in Moscow last week.

The companies said combining Vimpelcom and Kyivstar will create one of the largest mobile operators in emerging markets. Vimpelcom and Kyivstar had combined revenues of $12.6 billion last year with about 85 million subscribers at year’s end, they said.

“We have turned a five-year struggle into an exciting venture for the future,” the statement quoted Baksaas as saying. He urged Vimpelcom shareholders to support the deal, and Altimo CEO Alexei Reznikovich expressed confidence the merger would “substantially increase shareholder value.”

Baksaas would not discuss how the deal emerged from the bitter battle.

“As to who did what at what point of time, that isn’t so relevant. The most important part now is that we’re here,” he told a news conference in Oslo.

Jon Edvard Thygesen, Telenor vice president and head of Eastern European operations, said that “all legal cases between the shareholders have been suspended and will be withdrawn prior to closing.”

He said a case involving Farimex Products Inc., a tiny Vimpelcom stakeholder that claimed Telenor’s efforts to block a takeover deal in Ukraine had resulted in huge losses, was among those that would be withdrawn or resolved.

After a Siberian court ruled against Telenor earlier this year, bailiffs authorized the auction of the majority of its stake in Vimpelcom in a bid to recover $1.7 billion in court-awarded damages.

Telenor has refused to pay the damages, contending that the suit was flawed and that Farimex was a front for Alfa Group — a claim that both Farimex and Alfa have denied.

“The Farimex case will go away before closing,” Thygesen.

Vimpelcom Ltd. will provide mobile telecom services in Russia, Ukraine and other ex-Soviet republics, including Georgia, as well as Vietnam, Cambodia and Laos, the statement said.

Vimpelcom operates the Beeline brand in Russia and neighboring countries.

Its shareholders will be offered new shares in VimpelCom Ltd. based on their current shareholdings, Thygesen said.

Associated Press Writer Ian MacDougall contributed to this report from Oslo.

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