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Telenors Worst Nightmare

Published: June 30, 2009 (Issue # 1487)




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Telenor, the Norwegian telecoms giant, is caught in a dispute with Alfa Group, one of Russias largest holdings, over the highly lucrative mobile telephone business in Russia and Ukraine. The Norwegian state is a majority shareholder of Telenor, and Alfa is owned by Mikhail Fridman, an oligarch estimated by Forbes in 2008 to be among the 20 richest people in the world. He also has close ties to the Kremlin.

The background to this revealing story of how the power elite do business is as follows: VimpelCom, Russias second-largest mobile phone operator, is 44 percent owned by Alfa, and 29.9 percent of the voting stock 33.6 percent of actual shares is owned by Telenor. In Kyivstar, Ukraines No. 1 mobile phone operator, the situation is somewhat reversed: Telenor owns 56.5 percent, and Alfa has 43.5 percent.

In 2004, VimpelCom, keen to expand into the Ukrainian market, proposed the take over of a small company called Ukrainian Radio Systems, or URS. The deal was opposed by Telenor, which fended off the move for a year, but the purchase was approved by shareholders in 2005. The purchase price totaled $231 million after URS was unsuccessfully offered to another bidder for $100 million.

At the heart of the deal was a shareholders agreement between Telenor and Alfa that any arbitration would take place in Geneva. However, a microscopic shareholder in VimpelCom, Farimex, took Telenor to court in Siberia for loss of profits in the Ukrainian market. Farimex owns 0.002 percent of VimpelComs shares and is registered in the British Virgin Islands. The owner apparently was a businessman named Dmitry Fridman, and Alfa insisted that there was no connection to Mikhail Fridman.

Farimex said Telenor stalled VimpelComs penetration into the Ukrainian market and thus damaged growth prospects, claiming an absurd $1.7 billion for the one-year delay. Still, Farimex won its case in Omsk last year. Telenor refused to put up the money and saw its stock in VimpelCom frozen by the court. An appeal scheduled for June 10 was delayed until Sept. 30 for technical reasons.

This outcome is Telenors worst nightmare. It had hoped for a decision, any decision, and to bring the case to the Supreme Court in Moscow. Under Russian law, the court can take ownership of confiscated property after a second trial even if there is an appeal pending to the Supreme Court. So, Telenors shares in VimpelCom can now be sold on the open market before September and before any consideration by the Supreme Court. In that case, it is game over. Court marshals said on June 19 that they had approved an order to auction off Telenors shares and that the parties were in the process of being notified.

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ALL ABOUT TOWN

Saturday, Oct. 25


AVA Expo, the eighth edition of the event revolving around all things pop, returns to Lenexpo this weekend. Geeks, nerds, dweebs and dorks will have their chance to talk science fiction and explore a variety of international pop culture. Tickets for the event can be purchased on their website at avaexpo.ru.



Sunday, Oct. 26


Zenit St. Petersburg returns home for the first time in nearly a month as they host Mordovia Saransk in a Russian Premier League game. Currently at the top of the league thanks to their undefeated start to the season, the northern club hopes to extend the gap between them and second-place CSKA Moscow and win the title for the first time in three years. Tickets are available at the stadium box office or on the clubs website.



Monday, Oct. 27


Today marks the end of the art exhibit Neophobia at the Erarta Museum. Artists Alexey Semichov and Andrei Kuzmin took a neo-modernist approach to represent the array of fears that are ever-present throughout our lives. Tickets are 200 rubles ($4.90).



Tuesday, Oct. 28


The Domina Prestige St. Petersburg hotel plays host to SPIBAs Marketing and Communications Committees round table discussion on Government Relations Practices in Russia this morning. The discussion starts at 9:30 a.m. and participation must be confirmed by Oct. 24.



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