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. Last Updated: 07/27/2016

VimpelCom Ends Its Bid for Kyivstar

MTVimpelCom is now looking to focus on Ukrainian Radio Systems, or URS, CEO Alexander Izosimov said Thursday.
The country's No. 2 mobile operator,VimpelCom, on Thursday withdrew its $5 billion offer to buy Ukraine's largest mobile operator, Kyivstar.

Negotiations between two of the three parties involved in the Kyivstar talks -- Norwegian telecoms giant Telenor and Alfa Group's telecom arm Altimo -- have reached a stalemate, VimpelCom CEO Alexander Izosimov said Thursday.

"We regrettably had to withdraw today our offer to buy Kyivstar," Izosimov said.

Telenor owns 56.5 percent of Kyivstar, while Alfa holds 43.5 percent. The two also hold stakes in VimpelCom, with 29.9 percent under Telenor's control and 32.9 percent under Alfa's.

Telenor and Altimo failed to see to eye-to-eye on a divorce provision put forward by Telenor as a prerequisite for the deal.

VimpelCom is going to focus on expanding in Ukraine through Ukrainian RadioSystems, or URS, which the company acquired in November, Izosimov said.

"It's better to have a sparrow in your hands than a large pelican somewhere in the bushes," Izosimov explained.

VimpelCom would gladly return to the negotiating table, he said, once Altimo and Telenor make some progress regarding their positions.

Analysts said, however, that the fellow shareholders would be unlikely to budge soon.

In March, Telenor said it would sell Kyivstar to VimpelCom, provided that Alfa agreed to a "market-based separation" to allow either Alfa or Telenor to buy the other out of VimpelCom. The "market-based separation," which could be triggered by either Alfa or Telenor at any time, would give control of VimpelCom to the highest bidder.

"Telenor demanded a number of unacceptable conditions for the deal, thus breaking up the negotiations," Altimo spokesman Kirill Babayev said in a written response Thursday.

Altimo would continue the Kyivstar talks if Telenor put forth "reasonable" conditions, he said.

Telenor, however, showed no signs of giving way.

"Our offer has been and remains on the table," Kjell Morten Johnsen, head of Telenor Russia, told reporters at a news conference Thursday.

"We will not do this without a separation agreement," he said.

Johnsen insisted that the agreement was "not a vehicle for [Telenor] to take control," but analysts said it was more advantageous for Telenor.

The Norwegian company would have an easier time outbidding Altimo for VimpelCom after getting $5 billion for Kyivstar, said Yelena Bazhenova, a telecoms analyst at Aton.

VimpelCom, which launched its Bee Line brand for URS subscribers in April, is showing solid results in Ukraine, Bazhenova said. This serves as a disincentive for Altimo to give into Telenor's separation agreement, she said.

VimpelCom had a 0.8 percent share of Ukraine's market, with 278,000 subscribers by the end of March. The company aims to increase its Ukrainian subscriber base to at least 1.5 million by the end of this year, Izosimov said.

Vimpelcom's net profit rose to $150.2 million in the first quarter of this year, up 37 percent from the first quarter of 2005. The company's revenues rose 46 percent to $936.2 million from $640.6 million.