Telenor and Alfa Group take the long road to a joint venture
One of Russia’s longest corporate battles came to an end on Monday, with Norway’s Telenor set to merge its stakes in Vimpelcom and Kyivstar with those of Alfa Group’s telecoms arm, Altimo.
In not only reaching agreement, but launching a combined joint venture, the two rivals surprised analysts after 5 years of legal battles and PR wars. The outcome will see Telenor merge its stakes in VimpelCom and Ukrainian mobile operator Kyivstar with those of Altimo, owned by Russia's Alfa Group, with Aleksey Rezhnikovich, CEO at Altimo, saying the move puts disputes in the past and returns the focus to operations.
“We managed to put this all behind. Right now we are on the same page. We are getting back to normal path of operations.”
Andrey Bogdanov, Head of Research at Gazprombank, says the long lasting Telenor Alfa Group dispute, over strategic direction and expansion plans for VimpelCom had been expected to continue further.
“None of the analysts or investors were expecting this to happen this year. I think people were expecting the conflict to continue for quite a while.”
The conflict arose from Altimo backed expansion plans for VimpelCom to enter Ukraine's mobile market. This placed it in direct competition with Kyivstar, controlled by Telenor. Gazprombank’s Bogdanov says haggling over the plan caused delays which set the major VimpleCom shareholders at loggerheads.
“The decision to enter Ukraine wasn’t made exactly at the time, when VimpelCom wanted to do so. It happened after year and a half, which was in a way too late, as by that time there was lesser space for a new entrant to the Ukrainian market, and then the both parties, I mean Altimo and Telenor, started to argue.”
Altimo claimed Telenor's opposition caused a delay in entering Ukraine, and demanded compensation. Another minor stakeholder, Farimex took legal action against the Norwegian company, which saw $1.7 billion in damages awarded against it. An appeal against this was adjourned only last week with the threat of seizure of the stake to pay the damages still in play.
All legal action will now cease between the two parties, with the joint venture, to be called Vimpelcom Limited, having a 9 man board with 3 directors from Altimo and Telenor, and 3 independent.
