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. Last Updated: 07/27/2016

Alfa Takes Rivalry With TeliaSonera to Turkey

Alfa Group said Thursday that it had outbid TeliaSonera for a stake in Turkey's top mobile phone firm, Turkcell, opening a new front in the pair's bitter business rivalry.

TeliaSonera has agreed with Turkey's debt-laden Cukurova group to pay $3.1 billion for a 27 percent stake in Turkcell, which has 23.4 million customers and controls 70 percent of the Turkish market, but Alfa said it had gone one better.

"We have made an offer ... to buy the same stake for a higher sum," Alfa Telecom vice president Kirill Babayev said. He declined to elaborate.

TeliaSonera said it still expected to complete the purchase of the Turkcell stake from the Cukurova group, raising its holding in Turkcell to 64.3 percent.

"We have an agreement with Cukurova to buy the remaining shares in Turkcell Holdings, and that deal will be completed," TeliaSonera spokesman Mikael Kongstad said.

Cukurova was unavailable for comment.

Turkcell said the purchase of 27 percent of the firm by TeliaSonera would be on the agenda of its annual general meeting on April 29.

Alfa Group is already at daggers drawn with TeliaSonera and its allies over the ownership of a one-quarter stake in Russia's No. 3 mobile firm, MegaFon.

Alfa bought the stake for $300 million from investment boutique LV Finance in 2003, but Bermuda-based investment fund IPOC -- now allied with TeliaSonera -- has challenged the deal in the courts, arguing it had a prior option to buy the shares.

The dispute has turned ugly of late, with police raiding Alfa Telecom's office in a fraud probe and prosecutors grilling LV Finance's head, Leonid Mayevsky, who has fled Russia.

Mayevsky has accused Russian officials close to IT and Communications Minister Leonid Reiman of being linked to IPOC and of instigating the fraud probe. Reiman has denied any role.

Analysts said the conflict has prevented Alfa from merging MegaFon with No. 2 mobile company VimpelCom, which it controls, to create a company big enough to displace market leader MTS.

They also said the Alfa bid for Turkcell was most likely an attempt to weaken TeliaSonera's position in the MegaFon conflict.

"TeliaSonera is very interested in the asset," said Renaissance Capital analyst Olga Zhilinskaya. "This is most likely a PR stunt ... an attempt to solve the MegaFon problem."

She said that if Alfa bought the Turkcell stake, it could offer to swap it for TeliaSonera's stake in MegaFon.

Analysts said they expected the deal between TeliaSonera and Cukurova to hold, though the rival bid could force the price up.