Telenor v Alfa: in bed with enemy

Legal wrangles between Telenor, a state-owned Norwegian company, and Russian conglomerate Alfa Group, have come to the anticipated finale.

In a joint statement on Monday Telenor and Altimo, the telecommunications arm of Alfa Group, said that they agreed to combine their holdings in Russian Vimpelcom and Ukrainian Kyivstar into a new jointly owned mobile operator called Vimpelcom Ltd.

The company worth $26 billion will be incorporated in Bermuda – as far from the jurisdiction of Russian courts as possible, headquartered in the Netherlands and listed on the New York Stock Exchange.

Altimo will get about 44 per cent of the voting shares and Telenor, almost 36 per cent. The united company will provide telecom services in Russia, Ukraine and other CIS countries, as well as Georgia, Vietnam, Cambodia and Laos.

The agreement, called by Jon Fredrik Baksaas, the Telenor’s CEO, a ‘milestone’, looks like the Alfa’s victory. Essentially a financial group, Alfa never really wanted to separate with the Norwegians. It was angry that, as it claimed, Telenor was curbing the company’s expansion beyond the Russian borders but it was hardly capable of doing the business all by itself.

Norwegians, on the other hand, seemed rather unwilling to continue this gloomy marriage, but when court in Siberia ordered Telenor to pay $1.7 billion in damages for delaying VimpelCom's expansion into Ukraine - and loosing its Russian business became a reality - the price of divorce got too high.

The new union is contingent on all legal problems evaporating. However, Altimo is not, strictly speaking, a party to the legal battles and it always refused any connection to Farimex, a formal cause of the Telenor’s hardships in Russia. Yet, when the deal was announced the shares of the Norwegian company jumped 15 per cent.

It appears that who did what is not a big secret.



October 8, 2009