UPDATE 3-Telenor trapped in Siberia court as appeal adjourned

* Confounds Telenor’s hopes to move case to top Moscow court

* Hearing to resume on March 24, 2010

* No progress seen in talks with Alfa

(Recasts, adds Telenor CEO comments)

By Maria Kiselyova

MOSCOW, Sept 30 (Reuters) - Norway's Telenor ASA TEL.OL failed to put an end to its Siberian court saga on Wednesday as its appeal against a $1.7 billion fine was adjourned for six months, keeping alive the threat of an outright loss of its Russian business.

Wednesday's adjournment of the case, over a fine payable to Russia's No.2 mobile operator Vimpelcom VIP.N, came a day after Telenor Chief Executive Jon Fredrik Baksaas met Russia's Prime Minister Vladimir Putin.

Telenor had hoped the Siberian court marathon would be over and the case would be brought to Moscow, where Telenor believes its chances of winning are bigger. [ID:nLT594580]

“We would prefer to see ... an escalation to the next level,” Baksaas told Reuters Financial Television on the sidelines of a conference in Moscow. “The court has decided to push it further and we will see what we can do about that.”

Telenor is appealing against the fine imposed last year after Farimex, a small shareholder in Vimpelcom, filed a suit saying Vimpelcom had been damaged by Telenor’s reluctance to expand into Ukraine.

Wednesday’s court adjournment until March 24 was granted after a motion from Farimex.

If Telenor had lost the appeal, it would have been able to immediately appeal to Russia’s Supreme Arbitration Court, the superior Russian judicial body for the resolution of commercial disputes in arbitration courts. [ID:nLS354744]

The Norwegian group owns 29.9 percent of Vimpelcom’s voting shares. Most of that stake has been seized as security by Russian bailiffs who are threatening to sell the shares to pay the fine before the appeal is concluded. [ID:nLJ385090]

The case is being closely watched by investors who are sceptical the stake will be sold but fear it could undermine confidence and asset values if a foreign company, part owned by a European state, was stripped of a prime asset.

Telenor believes Farimex has been acting on behalf of the other main Vimpelcom shareholder and its partner in Ukrainian mobile leader Kyivstar, Alfa Group.

The legal process is seen by some analysts as a tool to put pressure on Telenor in talks over the fate of their joint investments.

Alfa denies being connected to Farimex.

Analysts have said the most likely resolution would be a corporate divorce giving Alfa’s 43 percent stake in Kyivstar to Telenor, with Alfa gaining Telenor’s voting shares in Vimpelcom.

“There are always contacts (with Alfa),” Baksaas said when asked about a possible out-of-court resolution of the dispute. He declined to elaborate.

Telenor shares, which hit a 51-week high in early trading, were up 0.4 percent at 66.95 crowns at 1000 GMT, outpacing a 0.2 percent fall on the DJ Stoxx European telecom index .SXKP. (Additional reporting by Kiryl Sukhotski in Moscow and Wojciech Moskwa in Oslo; Editing by David Holmes)