Global Insight Perspective | |
Significance | A US$2.8 billion fine, imposed on Telenor by a Siberian court, has been cancelled on appeal, but could yet be enforced with a retrial due in February 2009. |
Implications | Telenor has alleged that minor VimpelCom shareholder Farimex, which brought the lawsuit against it, is acting on behalf of Russia's Alfa Group, a claim the latter has denied. |
Outlook | Irrespective of the outcome of the retrial in February 2009, it is likely that Telenor will eventually divest its VimpelCom stake, as the burden of numerous rows with Alfa takes its toll. |
Norway's Telenor, a 29.9% shareholder in Russian telco VimpelCom, has won an appeal against a US$2.8-billion fine imposed by a Siberian court in Khanty-Mhansiisk. The decision has been cancelled by the Eighth Arbitration Appellate Court in Omsk, and a retrial will be held on 19 February 2009. The decision of the Siberian court was cancelled, according to the widely-quoted Telenor lawyer Grigory Chernyshev, because of "serious violations of the procedural law" by the court.
The ruling and US$2.8-billion fine had been brought by the court after a lawsuit was filed by British Virgin Islands-based Farimex, a minor (0.002%) VimpelCom shareholder. Farimex filed a lawsuit in which it claimed that Telenor had financially harmed VimpelCom by delaying by nearly a year the US$230-million acquisition of Ukrainian RadioSystems (URS), a deal finally concluded in November 2005, against the will of the Nordic group (see Russia: 18 August 2008: Telenor Plans Appeal Against Ruling to Pay US$2.8 bil. to VimpelCom). Telenor has continued to reiterate its stance that the URS purchase was overpriced, with the operator's subscriber market share dropping to 3.8% at the end of the first half of 2008.
Outlook and Implications
Telenor Allegation of Alfa Involvement
Telenor alleges that Farimex is acting on behalf of Altimo, the telecoms arm of Russian holding Alfa, which owns a 44.0% stake in VimpelCom. Altimo has denied any such connection, although Telenor has pointed out that Farimex's only director, Dmitry Fridman, is the fist cousin of Alfa owner Mikhail Fridman. Telenor Vice President, Dag Melgaard, has been particularly forthright in his accusations, claiming that it is a "key part" of Alfa's strategy to use "proxies" in Ukraine and Russia.
Divestment of VimpelCom Stake is Likely
Telenor will have to keep the champagne on ice, as its victory appears to be only temporary. Should it lose its appeal at the February retrial it could be forced to pay the US$2.8-billion fine, or sell off its VimpelCom stake to Alfa (see Russia: 25 June 2008: Altimo Denies Link to Latest Lawsuit against Telenor). However, whatever the outcome, a divestment by Telenor of its VimpelCom stake could nevertheless be on the cards. The Nordic group earlier this year indicated that it is keen to sever ties with Alfa as the burden of various interminable rows with the Russian group takes its toll (see Russia: 20 August 2008: Telenor Hints at VimpelCom Sale as Means of Divorcing Alfa).
Omsk Court Has Previously Ruled Against Telenor
The outcome of the February trial is uncertain, as the Omsk court has previously ruled against Telenor, temporarily freezing its VimpelCom stake in October. Telenor has traditionally had more success with U.S. courts. Should the Omsk court rule against it, Telenor has indicated that it will appeal such a decision in a higher court.