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. Last Updated: 07/27/2016

Telenor Drops VimpelCom Lawsuit

VedomostiVimpelCom, which owns the Beeline brand, purchased Kiev-based Ukrainian Radio Systems for $231 million in 2005.
Telenor confirmed on Wednesday that it ended its objections to the purchase by VimpelCom of Kiev-based mobile firm Ukrainian Radio Systems in a signal that the Norwegian company's long-standing dispute with telecommunications group Altimo may be coming to an end.

"After pondering the futility of our legal efforts, we have decided to let things rest," Telenor's director of communications, Anna Ivanovna-Galitsina, said by telephone.

But Telenor said it would persist in seeking legal redress in other disputes with its partner Altimo, the telecom arm of billionaire Mikhail Fridman's Alfa Group, which owns a majority stake in VimpelCom.

The dispute between Altimo and Telenor arose from differences over the strategy and control of VimpelCom and Kyivstar, Ukraine's largest mobile operator. Telenor owns a 26.6 percent stake in VimpelCom, while Altimo holds a 32.9 percent stake in the company. Both companies also have shares in Kyivstar, with 56.5 percent and 43.5 percent stakes being owned by Telenor and Altimo, respectively.

VimpelCom spokeswoman Yekaterina Osadchaya on Wednesday welcomed Telenor's decision.

"[This] vindicates our position that we were doing the right thing all along," Osadchaya said.

Altimo vice president Kirill Babayev said Telenor was right in its decision, adding that his company would welcome future cooperation with Telenor.

Andrei Bogdanov, a senior analyst with Troika Dialog, said Telenor was forced to give up its fight with VimpelCom over Ukrainian Radio Systems because both had lost out in revenues while the conflict lasted.

"Telenor's move is a political compromise that will allow Altimo to regain lost ground in Ukraine," Bogdanov said. "Telenor also expects a payback in the form of maintaining its control over Kyivstar."

A shareholders' meeting for Kyivstar has been called for Monday by Telenor, although neither Telenor nor Altimo has expressed confidence that the occasion will lead to an immediate breakthrough.

Telenor spokeswoman Ivanovna-Galitsina said the meeting was mainly devoted to resolving issues of corporate governance, which have contributed to holding up agreement between the firms. Kyivstar has been run for three years without a board of directors as a result of Altimo consistently boycotting shareholder meetings, she said.

Altimo's Babayev declined to comment on whether Altimo would take part in the meeting.

A New York arbitration court last month ordered Alfa to sell its stake in Kyivstar to a nonaffiliated company within 120 days or to relinquish its holdings in rival Ukrainian operators.

Telenor filed three lawsuits in Russian courts in 2006 against VimpelCom's purchase of Ukrainian Radio Systems for $231 million in 2005 in an effort to invalidate the purchase, but all the legal bids failed.

Telenor complained that the price paid for the mobile operator, which in 2005 accounted for less than 1 percent of the Ukrainian market, was excessive. The company also objected to VimpelCom's expansion into the Ukrainian market because Telenor already had a presence in the country through its 56.5 percent stake in Kyivstar.