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. Last Updated: 07/27/2016

Telenor's CEO Warns VimpelCom

BloombergBaksaas
VimpelCom will miss opportunities to offer new mobile-phone services at home and to expand in Asia if Telenor is forced out as a shareholder in an ongoing court battle, Telenor's chief executive told The Moscow Times.

The lawsuit, which threatens to strip Norway's Telenor of its multibillion-dollar investment in Russia's second-biggest mobile-phone operator, has drawn the attention of both countries' governments and stirred new fears among investors about Russia's court system. A Tyumen court on Wednesday is due to hear Telenor's latest appeal of a ruling to pay $1.7 billion to VimpelCom for delaying a deal to expand in Ukraine several years ago.

Telenor CEO Jon Fredrik Baksaas said the case had no merit from his company's prospective and the court needed to examine the facts better.

"We are of the fundamental belief that the basic question for the case ... is of no ultimate substance," Baksaas said in an interview on the sidelines of last weekend's St. Petersburg International Economic Forum. "However, we have not been successful in getting that message across in the court system that has treated the case up to now."

He said Telenor expected the court to now "address the facts of the case in a deeper and wider manner than has been done in previous rulings."

Telenor believes that its partner in VimpelCom, billionaire Mikhail Fridman's Alfa Group, is behind the lawsuit, which was filed by an obscure VimpelCom minority shareholder. Alfa denies that.

Norwegian Prime Minister Jens Stoltenberg said during talks with President Dmitry Medvedev and Prime Minister Vladimir Putin last month that his government, a major shareholder in Telenor, strongly wanted the trial to go through all the possible appeals before Telenor was forced to give up its 29.9 percent stake in VimpelCom to pay the $1.7 billion in damages. Telenor lost an appeal to postpone the sale last week, and the Court Marshals Service said Monday that it would offer the stock on the open market in the "near future."

Baksaas said it was a bad time for the Russian company to lose a Western partner. The economic crisis, he said, has overlapped with the saturation of the wireless market in Russia, leading telecom operators to bet on new high-tech services and potential Asian consumers for profits to grow.

As VimpelCom's partner, Telenor could continue to make available its experience in promising technologies such as 3G, the third generation of mobile phones that allow features such as faster Internet access, better handling of video data and mobile banking, Baksaas said.

"We invested significant amounts into the future of both the industry here in Russia and VimpelCom as a company," Baksaas said. "Now, we are talking about an industry that needs to revitalize itself. And we, in Telenor, have another ... contribution to make to Russian telecoms, as well as VimpelCom in particular. With the experience that we have now from many countries, I think we have a competence level ... which is also valuable for this market."

Telenor, with 70 million subscribers in Asia, could also advise VimpelCom on its foray into Vietnam and Cambodia, which began with the acquisitions of licenses there last year, Baksaas said.

Baksaas indicated that Telenor would be ready to talk about injecting cash into VimpelCom, whose finances took a hit after it purchased mobile-phone retailer Yevroset and land-line operator Golden Telecom in the past two years. Telenor wants to see VimpelCom as an "aggressive" company on expansion, Baksaas said.

"There are a lot of elements where we feel that it is definitely possible for VimpelCom to develop, and the strength in the balance sheet would be helpful," he said. "What is the format for this to happen? That is the responsibility of the shareholders to find out together with the management."

At the economic forum, Baksaas took part in a meeting of international executives with Medvedev and, a company spokeswoman said, separately sat down with several government ministers. The spokeswoman, Anna Ivanova-Galitsina, declined to say whether the lawsuit had been discussed at any of the meetings, saying only, "Telenor is very happy about its participation in the forum."

Analysts have said the legal battle might be part of no-holds-barred negotiations between Telenor and Alfa about the future of their partnership in VimpelCom and Ukrainian mobile-services provider Kyivstar.

Asked how Alfa would feel about losing its Norwegian partner, a representative of the Russian company offered praise for Telenor. "We believe that our partnership is mutually beneficial and wholesome for the companies where we are shareholders," said Kirill Babayev, vice president of Altimo, the unit of Alfa Group that runs its telecoms business. He declined to speak about VimpelCom's prospects without Telenor's support.

The court seized Telenor's stock after a ruling in March. Telenor's next appeal will be heard Wednesday by the Federal Arbitration Court of the Northeastern District, based in Tyumen. The court is to consider whether the lawsuit filed by Farimex Products, holder of a 0.002 percent stake in VimpelCom, over the delayed Ukrainian deal holds any ground.