U.S. Court Upholds Alfa Group Fine Ruling

OSLO -- A U.S. federal court has ruled again in favor of Norwegian telecom group Telenor in a dispute against Alfa Group, rejecting an Alfa motion to delay fines imposed last month, the court's decision showed.

The ruling is part of a long-running legal and boardroom battle between Telenor and Alfa over strategy and control of their two mobile telecom ventures, Vimpelcom and Ukrainian operator Kyivstar.

The U.S. District Court for the Southern District of New York upheld on Wednesday its November ruling, which ordered Alfa Group to pay fines starting at $100,000 per day to Telenor and to deposit shares in co-owned Ukrainian operator Kyivstar with the court, a copy of the court's ruling showed.

A spokesman for Alfa's telecoms arm Altimo declined to comment.

Telenor shares closed up 1.14 percent at 40 crowns, outpacing a 1.7 percent decline in the Oslo bourse's benchmark index.

In its Nov. 19 ruling, the court had held Alfa's Altimo and its affiliates in contempt of a U.S. arbitration court ruling concerning Kyivstar and ordered it to sell its shares in the Ukrainian operator.

The verdict was against Altimo's Storm unit and its corporate parents, which then sought to amend parts of the ruling, requiring Storm to deposit its Kyivstar shares with the court to ensure compliance.

"Storm's motion to amend the contempt order is denied," U.S. District Judge Gerard Lynch said in the decision.

"Given Storm's history of failing to comply with this court's orders, there is no reason to assume that Storm actually intends to comply by Dec. 16, its counsel's attestations to the contrary notwithstanding," the court said.

Storm had sought an amendment to the verdict to delay the fines beyond a scheduled Dec. 16 meeting of shareholders in Kyivstar and avoid depositing the shares, but both motions were denied, the court's decision said.

"The fine of $100,000 per day will start running from today," Telenor's spokesman Dag Melgaard said on Thursday.

The fines imposed by the New York court on Alfa Group are set to start at $100,000 per day and double every 30 days until Alfa complies with the verdict.

The court ruled that Telenor should not take steps to collect any fines until Dec. 17, after the Kyivstar shareholders meeting, the court document showed.

Telenor will seek at that meeting to elect a new Kyivstar board with five Telenor-appointed and four Alfa-appointed members, amend the charter and appoint new auditors to settle its 2006-2007 accounts, Melgaard said.

Telenor blames Altimo for obstructing the administration of Kyivstar, including by refusing to attend shareholder meetings, which has prevented the settlement and auditing of the accounts and thereby also prevented distribution of dividends.

"We have tried to call a shareholders meeting monthly for quite some time," Melgaard said.

But he offered a chance of a settlement.

"If they appear at the shareholders meeting on Dec. 16 in Kiev, we might reconsider the fine on Dec. 17," he said.

Telenor owns 56.5 percent of Kyivstar voting shares, and Alfa and its partners own the rest.