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. Last Updated: 07/27/2016

Telenor Wins Kyivstar Ruling in U.S.

For MTA New York arbitration panel ordered Alfa to sell its stake in Kyivstar or competing assets. Alfa rejected the ruling.
A U.S. arbitration panel handed Norwegian telecom operator Telenor a victory over Alfa Group in a spat about control of Ukrainian venture Kyivstar, but it was unclear whether the verdict could be enforced.

Telenor said Thursday the U.S. court ordered Alfa to sell its Kyivstar stake or divest from competing Ukrainian mobile groups within 120 days. But Alfa said the ruling would have no impact because it could not be enforced in Ukraine.

Telenor holds 56.5 percent in Kyivstar, Ukraine's largest mobile group, while Storm, an Alfa unit, owns 43.5 percent. The two groups are also fighting for control of Russia's No. 2 mobile firm, VimpelCom, of which they are the main owners.

"Initially, this appears as very, very positive for Telenor," said Espen Torgersen, analyst at brokerage Carnegie in Oslo. "It increases the probability of commercial negotiations, not court suits, ultimately setting the terms of their divorce."

Alfa rejected the ruling.

"The New York tribunal award cannot change the legal situation around Kyivstar, which is to be resolved by means of Ukrainian laws," Alexei Reznikovich, CEO of Alfa Group's telecoms arm Altimo, said in a statement.

"We will proceed to defend our minority shareholder's rights in Kyivstar and are confident in them, both legally and morally," he said.

Telenor said the Kyivstar shareholder agreement was drafted in New York, and its arbitration governs all shareholder conflicts. The decision is final and binding for Ukraine, which must uphold it as a member of the United Nations, it said.

On Wednesday, Alfa Group sources said the two groups would strike a deal to end their dispute by the end of the week, and would pool their telecom assets in Russia and Eastern Europe. But a Telenor spokesman said a deal would instead see the groups separating their assets.

One divorce scenario would be a share swap between the groups' holdings in Kyivstar and VimpelCom, in which Telenor owns nearly 30 percent and Altimo 44 percent.

"The most likely scenario is that Telenor and Alfa finally agree on a separation -- with Telenor taking Kyivstar and Alfa gaining control of VimpelCom," said Stefan Pettersson, analyst at Kaupthing Bank in Stockholm. "And this arbitration decision has pushed that solution a little bit closer."

Asked about a possible resolution to conflicts with Alfa, Telenor spokesman Dag Melgaard said Thursday, "We don't see the way out as of yet. We see more proof and evidence of Alfa's mistakes and wrongdoings -- they will have some explaining to do."

Telenor said the tribunal ordered Alfa to sell its Kyivstar shares within 120 days or divest shareholdings in Turkcell and Ukrainian High Technologies that exceed 5 percent.

Konstantin Chernyshev, telecoms analyst with UralSib, said there had been "so many court decisions in this case that the latest one plays no significant role in the resolution of the conflict.

"When the shareholders wake up to the fact that continued conflict will have a negative impact on Kyivstar assets, they will look for a solution," Chernyshev said. (Reuters, MT)