Alfa Group - Dispute With Telenor

Dispute With Telenor

Alfa started investing in VimpelCom in summer, 2001. The power-broking between Alfa group and Telenor in VimpelCom started 2004, when Alfa proposed that VimpelCom acquire a larger share in Ukrainian RadioSystems (URS), a small GSM operator in Ukraine operating under the brand «WellCom». Telenor found the price of US$132 million far too high, after the Russian telco Golden Telecom had declined acquiring URS at a far lower price. In October, 2004, a minor shareholder of VimpelCom lodged three law-suits against Telenor in the provinsial city of Krasnodar in Siberia, with claims that the VimpelCom shareholder agreement be cancelled, and the URS shares be acquired.

In May, 2005, the Alfa Group filed a law-suit against Telenor, via Alfa's daughter company Eco Telecom Ltd, contesting the declination of Telenor's three VimpelCom board members to approve the URS acquisition. Eco Telecom especially contested Telenor's vetoing power in the VimpelCom shareholder agreement. After the trial, Alfa Group declined during four years to take part in the board of managers meetings in Ukrainian Kyivstar, thereby blocking the normal procedures of annual assemblies, approval of accounts, and payments of dividends. In 2008 Telenor achieved several legal approvals in the U.S. Federal Court of Appeal in New York, and in 2009 the Alfa Group submitted to the rulings and took up normal shareholder activity in Kyivstar. In Russian VimpelCom, however, the Alfa Group geared up its legal battle with Telenor by nominating more directors than Alfa's capital share implied. In January, 2007, a court of appeal in Geneva, Switzerland ruled that Alfa Group had violated the shareholder agreement of VimpelCom.

In November 2005, VimpelCom acquired 100% of URS, after having got approval from VimpelComs annual assembly. Thereby, the Alfa Group owns shares in both URS (Beeline Ukraina) via VimpelCom, and in Golden Telecom which operates in both Russia and Ukraine, and in Ukraine's major mobile operator Kyivstar GSM, and in Turkish Turkcell which owns a stake in the Ukrainian mobile operator Astelit. Telenor and Alfa disagree over the latter's ownership in three of Kyivstar's competitors in the Ukrainian market.

In 2004, Alfa Group's daughter company «Storm» filed a number of law-suits against Telenor, to nullify a number of provisions in the Kyivstar charter and shareholder agreement. Alfa Group especially wanted to nullify an arbitration case that Telenor had lodged in New York, but was rejected. Alfa reacted to their legal loss by boycotting all normal shareholder activity in Kyivstar, for four years from 2004, effectively blocking the business of annual assemblies, and avoiding the consolidation and ratification of Kyivstar's annual accounts. No dividends were paid after 2003. In February, 2006, Telenor took the issue to a U.S Federal court in New York.On 16 December 2008, Alfa Group resumed normal shareholder activities, joined in the election of a new board of directors, and agreed to pay accumulated dividends. On 11 March 2009, the Federal district court in New York ruled for the second time that Alfa companies Altimo, Storm, Alpren and Hardlake had revealed contempt for the court by not depositing their Kyivstar shares in the United States. Alfa Group was convicted to daily penalties of US$100,000 from 12 March, and a further 100,000 daily if not either Alfa's shares in Kyivstar be sold, or ownership in competing business be reduced to a maximum 5%. NeOn 28 April 2009, the New York court ruled that Alfa Group had submitted to the legal rulings. Judge Gerard E. Lynch established that Alfa Group had reduced their ownership in competing mobile operations in Ukraine.