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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

Friday, Aug. 29


Park Pobedy will feature the sights and sounds of the world outside of Russia during the Open Art International Festival today. Taste foreign cuisine, learn how to make tea like the Chinese or relax in a hammock during the free event. Although entrance is free, you must register beforehand if you wish to attend.



Saturday, Aug. 30


Break out the tweed and channel your inner Englishman during the English Hunt Picnic this afternoon organized by the Bagmut stables from Krasny Bor in the Leningrad Oblast. Equestrian stunts, English archery and classic hunting fashion will all be available to visitors hoping to live like the characters in Downton Abbey if only for a day. Tickets for the event cost 7,900 rubles ($219.40).


Bookworms will have their chance to swap out well-read classics for something new for their bookshelves at Knigovorot, a free book exchange that will be held in the Yusupov Garden on Sadovaya Ulitsa today. Come for the chance to get a new book or take the opportunity to discuss the literary merits of your favorite authors with fellow fans.



Sunday, Aug. 31


The Neva Delta International Blues Festival wraps up this afternoon on Vasilevsky Island with a concert featuring not only some of Russias best blues bands but international stars as well. Admission is free for all three days of the festival, which begins on Aug. 29, and the shows starting at 5 p.m. each day.



Monday, Sept. 1


Today marks the beginning of Lermontov-Fest, a fall festival celebrating the life of one of Russias most remarkable poets who, in a fate eerily similar to Pushkins, was killed in a duel at the age of 26. Organized by the Lermontov Library System, the next several months will see art exhibitions, concerts and public lectures focusing on the Lermontovs short yet prolific career. Check the Lermontov Library Systems website for more details.



Tuesday, Sept. 2


Join expats and practice your Russian during the Russian Clubs weekly meetings every Tuesday night at 7:30 p.m. The club is free to participate in although you need to be a registered member of Couchsurfing.



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