MOSCOW (Dow Jones)--Russia's second-largest mobile phone operator OAO Vimpel Communications (VIP) Wednesday received a claim for $175 million in unpaid taxes, sending Russian stocks sharply lower across the board as market participants took the view that the move is part of the state's crackdown on oligarchs.
Analysts said the move had all the hallmarks of the government's crackdown on oil producer OAO Yukos (YUKO.RS), although the case against VimpelCom is harder to justify. In both cases, the government has pressured the company through tax claims and in both cases the size of the claims exceed pretax profit reported by the companies during the period claimed for.
"Whatever the nature of the claims is, the news will have an extremely negative effect on all of the telecoms stocks and the market altogether, as it shows that even companies that weren't involved in dubious privatization aren't risk-free," said Yevgeni Golossnoi, telecommunications analyst at Troika Dialog.
VimpelCom's shares, traded in New York, were yet to open Wednesday. However, the broader Russian market was down 6.3% with the majority of stocks sharply lower as participants expressed worries about the impact on Russia's wider economy and a possible widening of the Russian governments' crackdown on Oligarchs.
VimpelCom said the claim from Russia's tax authorities - which it will likely dispute - for unpaid tax in 2001 consisted of $90 million in tax and $67 million in fines. It said the claim mainly concerns its KB Impuls unit which holds an operating license for Moscow and the Moscow region, an area covering about a third of its customers.
Unlike previously state-owned companies that have been privatized, VimpelCom was created from scratch by foreign companies including Norway's partially state-owned Telenor (TLSN).
It has been complying with U.S. Securities and Exchanges Commission regulations since it was listed in New York in 1996 and hasn't used tax-minimizing schemes in Russia, unlike Yukos.
However, like Yukos, VimpelCom has an oligarchical shareholding structure. Its Mikhail Khodorkovsky - the jailed billionaire Yukos chief who had vexed the Kremlin with political influence and ambition - is Mikhail Fridman, whose Alfa Group (ALFAGP.YY) is one of Russia's wealthiest financial-industrial groups and owns 33% of VimpelCom as well as a large stake in international oil major TNK-BP (TNKB.YY).
Analysts say the tax claims against VimpelCom could be an attack on Fridman, prompted by his conflict with OAO Telecominvest (TCIV.YY) and IPOC International Growth Fund, sister-companies and shareholders of the third-largest mobile phone operator OAO MegaFon (MGF.YY).
Fridman's Alfa bought a 25% stake in Megafon - which is VimpelCom's main rival - in August 2003. But this is being contested by IPOC in different courts, as IPOC claims it had preemptive rights to buy the stake.
Russia's Information Technology Minister Leonid Reiman, who founded Telecominvest, is widely believed to still be the beneficiary owner of both Telecominvest and IPOC. In recent court hearings, Alfa's witnesses went as far as accusing Reiman of corruption and bribery. Since then many analysts were expecting Alfa to be subject to a counterattack.
"I'm surprised Fridman lasted that long," said a Moscow-based analyst who didn't want to be identified. "When the IT ministry treated VimpelCom nicely in the recent months - giving it new numbering capacity - I thought it was too good to be true, it felt like calm before the storm," he said.
Whereas there's little doubt the attack is aimed against Fridman, analysts said, VimpelCom will have to defend itself. The company said it may appeal the tax claim, which has by law to be supported by a court decision before becoming a bill with obligatory payment.
However, Troika Dialog's Golossnoi thinks VimpelCom should not fight the tax authorities. "The Yukos case shows that it's not worth fighting in courts, as nothing good comes out of it," he said, adding that the court is unlikely to find the size of the claim ridiculous.
Yukos' largest unit is currently being sold off to fund the tax office's claims against it after it failed to stop the claims in the courts.
According to Konstantin Chernyshev, a telecommunications analyst at Moscow-based Nikoil, VimpelCom would have had to earn at least $320 million in pretax profit in 2001 to be liable for the $97 million bill for unpaid taxes. It actually posted $70 million in pretax profit that year. "But our courts use laws, not logic," said Chernyshev.
He thinks VimpelCom should fight, but says that just as it was with Yukos, VimpelCom may still face more claims for 2002, 2003 and 2004 as KB Impuls still exists as a separate unit.
"Ever since the arrest of Khodorkovsky, the Russian market has wondered which oligarch will follow. "Now that we see it was Fridman, the question is again "who's next?", said Chernyshev.
Company Web site: http://www.vimpelcom.com
-By Anna Ivanova-Galitsina, Dow Jones Newswires; 7095-974-8055; anna.galitsina@dowjones.com
(END) Dow Jones Newswires"
Posted to the site on 8th December 2004
Posted to: www.cellular-news.com/story/11408.php