Telenor faces crunch time with Russian Alfa
OSLO, Dec 11 (Reuters) - Norwegian telecoms group Telenor (TEL.OL) and Russia's Alfa Group face a court decision and shareholders meeting in the coming days that could change the balance of power in their long-running and bitter disputes.
For years the two groups have been locked in numerous court and boardroom battles over the running of Russian mobile group Vimpelcom (VIP.N), in which they are the two biggest owners, as well as in their Ukrainian joint venture Kyivstar.
On Dec. 12, a Siberian court is due to resume a hearing into Telenor's appeal of a $2.8 billion fine regarding its actions in Vimpelcom.
Talks for a solution, touted as a "divorce" through an asset swap, have not moved forward in years but may restart as the sides re-evaluate their hands and face potentially huge fines.
"Negotiations are still the most likely option (to end the Telenor-Alfa row)... and we will soon find out where each side stands," said a senior executive familiar with the situation.
The case originated when British Virgin Islands-based Farimex, a small shareholder in Vimpelcom, filed the suit because it believes Telenor's reluctance to back Vimpelcom's expansion into Ukraine, where it would rival Kyivstar, hurt the Russian group.
Telenor holds 29.9 percent of the voting shares in Vimpelcom, the No. 2 mobile operator in Russia, while Alfa holds 44 percent. Telenor also holds 56.5 percent of the stock in Kyivstar, the largest mobile operator in Ukraine, while Alfa and its partners hold the rest.
Telenor has repeatedly said the case has no merit.
VIMPELCOM RISK
The judge could force Telenor to deposit its Vimpelcom stake and sell it off to pay the imposed fine, even if Telenor appeals the verdict in a higher court.
"The market is focused on the risk that Telenor may lose control of their Vimpelcom stock as a result of this decision," said Espen Torgersen, an analyst at Carnegie.
This course of events could further sour investment sentiment towards Russia, whose markets have been badly hit by the global financial crisis. It could also hit warm relations between Russia and Norway, which owns 54 percent in Telenor.
"This potential turbulence is not priced in to Telenor shares. It would probably also be quite a negative sign for foreigners looking to invest in Russia," said one analyst, who asked not to be named.
In another legal battle between Telenor and Alfa, the Federal court in New York held Alfa's telecoms arm Altimo and its partners in contempt of an U.S. arbitration court ruling about Kyivstar in favour of Telenor.
The U.S. verdict is in response to a number of issues including Alfa's representatives' boycotting shareholder meetings which are preventing the distribution of Kyivstar dividends.
On Dec. 16, Kyivstar will hold a shareholders meeting, where another failure to show up by Alfa's representatives -- who have boycotted meetings for years -- will now cost them hefty fines imposed by a U.S. Federal court.
It imposed fines starting at $100,000 a day from Nov. 29 and doubling every 30 days until they comply with the verdict. Alfa has defied the verdict so far, saying Ukrainian courts had jurisdiction in this case.
"The New York ruling is a blow for the Russians," said one analyst. "If they win the Siberian decision, both parties may return to the negotiating table to discuss a share swap, because the alternative could be too costly."
Shares in Telenor, which have been hit in past weeks by the company's plans to raise more capital, were down 2.5 percent to 39.70 crowns at 1529 GMT, lagging a 0.3 percent fall on the Dow Jones Telecoms Index .SXKP.
(Editing by Sharon Lindores)
