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August 24, 2005

Alfa fires another salvo at Telenor

The bitter relationship between the Russian conglomerate Alfa Group and Norwegian telecoms carrier Telenor ASA has deteriorated further still after Alfa filed a lawsuit against Telenor over the two companies' Ukrainian mobile joint venture Kyivstar.

By CBR Staff Writer

Alfa alleges that a number of Kyivstar’s corporate statutes violate Ukrainian law. Most recently it claimed that it was refused a say in the appointment of Kyivstar’s new CEO. Alfa Telecom, a major shareholder in the company, has been fully removed from the corporate governance and decision-making processes in Kyivstar, Alfa said. Kyivstar’s bylaws grant all corporate governance rights to Telenor.

Alfa said Kyivstar pays millions of dollars a year for overpriced management services that do not meet with the professional standards of the market. It went on to claim that Telenor has ignored all proposals to regulate Kyivstar’s affairs, and had no alternative but to take legal action.

The two companies have repeatedly clashed over the Ukrainian expansion plans of Russia’s second largest mobile operator VimpelCom BV. The Norwegian carrier owns 26.6% of VimpelCom’s voting stock, whereas Alfa Group has 32.9%. In June, Telenor suffered a setback after a shareholder vote left it with a minority position on the board.

Like VimpelCom, Kyivstar GSM is the second largest mobile operator in its domestic market, with a 9.8 million subscriber base and geographic coverage of 92% of Ukraine.

Alfa Telecom is the minority shareholder with a 43.5% stake via Storm, Telenor has a controlling 56.5% stake. Revenue at the operator reached $640.7m in 2004.

It is Storm (100% owned by Alfa Telecom) that has filed the suit. It seems that Alfa is keen to take part in the management of the company and it claims that Kyivstar’s charter contravenes some aspects of Ukrainian law that came in force late last year. It believes the operator is guilty of illegal and discriminatory management practices.

Telenor disputes Alfa’s claims, and has said that both it and Kyivstar are in full compliance with Ukrainian law. It claims instead that Alfa is removed from the running of Kyivstar because it has been boycotting management meetings.

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