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. Last Updated: 07/27/2016

Alfa Proposes Asset Swap With Telenor

OSLO -- Norway's Telenor said it had been approached by Alfa Group regarding a possible asset swap to end a bitter dispute between the two owners of cell phone group Vimpelcom.

The Financial Times reported Thursday that Alfa's telecom arm, Altimo, had sent Telenor a letter two weeks ago suggesting an asset swap possibly worth $4 billion, but Telenor said it did not yet trust Altimo to deliver on its promises.

Analysts were divided on the feasibility of such a deal, and the price of Telenor shares, a Nordic telecom giant worth $32 billion, was only marginally higher Friday.

Telenor and Altimo have strategic stakes in the country's No. 2 mobile operator, Vimpelcom Communications, and Ukrainian market leader Kyivstar, but the two have failed to agree on strategy.

Most recently, they butted heads over Vimpelcom's expansion to Ukraine, where it would rival Telenor-controlled Kyivstar.

"We are willing to sit down and discuss any constructive attempt to solve the conflict between us and Alfa," Telenor spokesman Dag Melgaard said.

Melgaard said Altimo CEO Alexei Reznikovich had been in Stockholm recently and had presented two proposals to resolve the standoff.

Altimo proposed a straight swap of its 43.5 percent stake in Kyivstar for Telenor's stake in Vimpelcom or, alternatively, would be prepared to lose Vimpelcom and control Kyivstar.

Melgaard said Telenor had not yet formally replied, adding that his company had had bad experiences in past deals with Altimo and was seeking a solution it could trust.

"We have experienced that what Alfa puts on paper can be abandoned as soon as the ink has dried, and we don't want to take that chance," Melgaard said. "We need a solution we can be sure of and trust."

Altimo declined to comment on the issue.

Espen Torgersen, an analyst at the Carnegie brokerage in Oslo, said a deal could be near, adding that such a solution would play into Telenor's strategy of either gaining operational control in ventures or exiting them.

"If proper, formal negotiations begin ... this kind of solution could very well secure a settlement and divorce between the two," Torgersen said, adding that it was too early to discuss specific asset valuations.

By gaining full ownership of Kyivstar, Telenor would better control the dynamic company, which has a 44 percent market share in Ukraine. But to do so, Telenor would have to exit the bigger and more valuable Russian market, which some said would be difficult.

"Telenor already controls Kyivstar, and there is no point for Telenor to buy more shares, especially since Russia is also important for them," said Anastasia Obukhova, an analyst at Deutsche UFG in Moscow.