Telenor Sued for $1 Billion by Russia's Altimo

Russia's Altimo has filed - via a subsidiary - a claim against Norway's Telenor for US$1 billion in damages with an international arbitration tribunal in Geneva. This claim is for alleged breached by Telenor of a Shareholders Agreement relating to Russian mobile company VimpelCom signed by Eco and Telenor to ensure fair and effective management of the assets of VimpelCom.

In 2004-2005, Telenor persistently blocked VimpelCom's attempts to enter the Ukrainian mobile market. In particular, Telenor's representatives on VimpelCom's Board of Directors tried to prevent the purchase by VimpelCom of Ukrainian telecommunication company Ukrainian Radiosystems (URS). As Altimo notes, Telenor is a majority shareholder in Kyivstar, another Ukrainian mobile phone company.

Altimo says that as a result of Telenor's actions, the purchase was delayed by approximately one year, and the delay destroyed shareholder value and significantly affected VimpelCom's profitability.

Eco Telecom, the Altimo leading the legal action is seeking damages to compensate it for these losses. It presently assesses the losses to all VimpelCom shareholders at $2.7 billion, which makes Eco's share around $1 billion.

After the general shareholders' meeting of VimpelCom took the decision to enter Ukraine and the URS deal was finalized in 2006, Telenor sued VimpelCom's management in various courts in Russia in an effort to undo the deal. However, the court decisions all went in favour of VimpelCom.

"We are pleased to support the arbitration claim filed today by Eco Telecom which is aimed to challenge the familiar underhand tactics displayed by Telenor, this time in its management of VimpelCom's affairs", Kirill Babaev, Senior Vice President of Altimo said.

Telenor says that it believes this proceeding has no merit, and will defend it vigorously.

"Alfa recently lost both the VimpelCom and Kyivstar-related arbitration proceedings brought by Telenor," said Telenor Chief Press Spokesman Dag Melgaard. "It is hard to see this claim as anything but an attempt by Alfa to pressure Telenor and attract media attention with its frivolous US$1 billion damage claim. VimpelCom's purchase of URS was an overpriced, non-transparent transaction. URS's weak performance since it was acquired by VimpelCom has confirmed that this was a bad deal for VimpelCom shareholders."

Telenor owns 33.6% of VimpelCom's shares of common stock and 29.9% of VimpelCom's voting capital stock. The arbitration proceeding brought by Alfa will be conducted in Geneva, Switzerland under the UNCITRAL Arbitration Rules before a panel of three arbitrators.

Posted to the site on 25th March 2008

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