A bitter five-year legal battle between Norwegian telecoms firm Telenor and the Russian Alfa group has finally ended. Both sides agreed to drop all their lawsuits against each other and merge their shares in VimpelCom and Kyvistar to form a new firm with vastly reduced risk for future conflicts. Telenor’s stock soared on the news.
Trading of Telenor shares opened on Monday at a price 14 percent higher than Friday’s close. It leveled off later in the morning but stayed strong by mid-day.
Investors clearly were as relieved as Telenor CEO Jon Fredrik Baksaas, who claimed that his firm and the Alfa Group of Russia were turning a lengthy legal conflict into an “exciting” new venture for the future.
Telenor and Alfa’s telecoms arm, Altimo, will merge their stakes in VimpelCom and Kyvistar to form a huge new mobile operator.
It will be called VimpelCom Ltd and set up in a neutral manner that will make it difficult for Telenor and Alfa to start fighting again: It will be registered in Bermuda, headquartered in the Netherlands and listed on the New York Stock Exchange. As such it will be subject to US regulatory control, and a new nine-member board of directors will be created so that neither Telecom nor Alfa should have an upper hand. Telecom and Alfa will get three members each, with the remaining three members to be independent.
The new VimpelCom Ltd will be enormous. Based on 2008 figures, it will have 85 million subscribers, revenues of USD 12.6 billion and pre-tax profits of USD 6.3 billion.
Telenor and Alfa are thus merging their way out of a protracted battle for control over VimpelCom. What started out as a promising cooperation between the Norwegian and Russian firms had degenerated into messy court cases on three continents that as late as last week appeared to be deadlocked, with Telenor threatened with the loss of its huge investment in the Russian mobile operation.
Now, Baksaas said Monday, Telenor and Altimo can concentrate fully on building up new values “and put all disagreements behind us.”
Officials for the Norwegian government, which officially maintains a controlling stake in the country’s former state telephone utility, were also relieved. Sylvia Brustad, the government minister for trade and industry, called the deal “good news” because it removes “great uncertainty” over the ownership of VimpelCom. She also called it a good deal for shareholders, of which the state is largest with 54 percent.
(For earlier coverage of the Telenor-Alfa conflict, see our business news rundown or tap “Telenor” into our SEARCH function at the top of the page.)