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. Last Updated: 07/27/2016

Norwegians to Buy 25% of Vimpelcom

State-owned Norwegian telephone company Telenor AS said Tuesday that it will buy a 25 percent stake in Russian cellular phone provider Vimpelcom for $160 million.

The announcement comes as Vimpelcom posted a net loss of $43.9 million for the third quarter of 1998 amid Russia's financial crisis.

"Russia is a huge market for mobile telephony and an important part of Telenor's international growth strategy," Tormod Hermansen, president and CEO of Telenor, said in a statement. "Vimpelcom ... fits well with our existing Russian investments."

The deal would mark Telenor's entrance into the Moscow mobile phone market. It already owns stakes in the St. Petersburg mobile phone company NorthWest GSE, Extel in Kaliningrad and Stavtelesot in Stavropol.

The companies said the $160 million will be used to develop Vimpelcom's cell phone licenses, fiber optic network, Internet services and other telecommunication projects.

"We believe that the infusion of capital into the company at this time will strengthen the company's competitive position in the Russian cellular market ... at a time when it is difficult for Russian companies to obtain financing," Vimpelcom President Dmitry Zimin said in a statement.

Under the terms of the deal, Vimpelcom will hand over a 25 percent plus one share stake and three of its nine board seats to Telenor.

Vimpelcom said it expects to benefit from Telenor's experience in penetrating and developing the global telephone market, and the Norwegian provider will in return get access to the Russians' extensive engineering expertise.

Vimpelcom, the first Russian firm to be listed on the New York Stock Exchange in 1996, employees 1,700 people and posted a net profit of $61 million on turnover of $306 million last year.

The company, however, is suffering as the financial crisis shrinks its customer base. In addition to its third quarter loss, Vimpelcom has posted net losses for the first nine months totalling $13.7 million, Prime-Tass said Tuesday.

The company, though, remains a favorite with stock analysts, who praise it as one of the most transparent and well-managed in the Russia.

Vimpelcom had 110,140 subscribers in the Moscow area at the end of 1997, the most recent figures available.

Telenor is a provider of fixed, mobile, satellite and Internet services and is based in Oslo, Norway. Telenor has 1.5 million cell phone clients in Norway, or 75 percent of the market.

Telenor also operates mobile telephone networks in a number of countries including Norway, Germany, Ireland, Greece, Bangladesh and Ukraine. It came to Russia shortly after the first mobile phone license was granted to the Leningrad region in 1991.

The deal between Telenor and Vimpelcom is subject to the approval of Vimpelcom shareholders and Russian federal authorities, including the State Anti-Monopoly Committee, the Federal Securities Commission and the Central Bank.

Vimpelcom said it plans to hold an extraordinary shareholders meeting in late January at which its board of directors will recommend the terms of the alliance. The deal is expected to be completed by June 1, 1999.