Alfa steps up legal battle with Telnor

Alfa Group on Tuesday intensified its battle with Norway’s Telenor and is poised to sue the telecommunications group over alleged illegal and discriminatory management practices at Kyivstar, the Ukrainian telecoms operator they jointly own.

The threat of a law suit from the Russian financial and industrial conglomerate is the latest development in the long-running spat between the groups in Ukraine, focused on how best to expand their intertwined telecoms interests.

Alfa claims that Kyivstar’s charter breaks Ukrainian law by allowing a single shareholder – Telenor – to nominate a single candidate for presidency of the Ukrainian company and dominate decision making. It also says a management services agreement inserting Telenor personnel in key positions in Kyivstar is unacceptable.

Kyivstar pays “millions of dollars a year” for overpriced management services that “do not meet with the professional standards of the market”, Alfa said in a statement.

Alfa said Telenor had ignored all proposals to regulate Kyivstar’s affairs. “In these circumstances Alfa sees no alternative but to take legal action in Ukraine to protect the rights of its shareholders”, the company said.

Telenor said that both it and Kyivstar “operate in full compliance with Ukrainian law”.

“It is utterly wrong to say that Alfa has been removed from the corporate governance and decision-making processes. Instead, they have boycotted the meetings,” said Dag Melgaard, head of communications at Telenor.

Mr Melgaard said the controversy warranted prompt resolution. “Kyivstar as a company has not yet suffered. But this situation can’t last forever”, he said.

Telenor earlier clashed with Alfa about the advance of Vimpelcom, Russia’s second largest mobile telephone operator, into Ukraine. Like Kyivstar, Vimpelcom is part owned by both Telenor and Alfa.

Telenor opposed Alfa’s plan to merge Vimpelcom with Kyivstar. Such a move would dilute the Norwegian company’s majority interest in Kyivstar which currently accounts for over 10 per cent of its group revenues.

Telenor also criticized a Vimpelcom plan to splash out $200m to buy Ukrainian Radio Systems (URS).

URS is a relatively new competitor in Ukrainian telecoms where Kyivstar enjoys close to 50 per cent of the growing mobile
market.

Alfa owns 43.5 per cent of Kyivstar and Telenor 56.5 per cent.