Vimpelcom, Russia’s second largest mobile phone company, has made a $5bn (€4.2bn) bid to buy Kyivstar, the leading mobile company in Ukraine. The merger would create the biggest telecoms player in the former Soviet Union.

Kyivstar is owned by Telenor, a Norwegian operator, and Alfa Group, one of Russia’s largest industrial holding companies. They are also the main shareholders in Vimpelcom.

The two groups are locked in a bitter dispute over Vimpelcom’s strategy in Ukraine. But analysts in Moscow said the Russian group’s proposals could end the long-running dispute between the shareholders.

Telenor did not rule out a merger between Vimpelcom and Kyivstar in principle but said its conflict over corporate governance with Altimo, the telecoms arm of Alfa Group, prevented it from commenting on the proposed tie-up.

“Alfa will need to prove to us it is willing to resolve all the disputes over corporate governance before we can consider discussing an offer,” a spokesman said.

Altimo, Alfa’s telecoms arm, said: “If Telenor takes a positive decision . . . Altimo is ready to back the deal on acquiring Kyivstar.” Altimo owns 32.9 per cent of Vimpelcom and 43.5 per cent of Kyivstar.

The merger between Vimpelcom and Kyivstar would be a significant concession by Telenor, which had previously ruled such a move out.

Telenor owns 56.5 per cent of Kyivstar, allowing it to consolidate its results. The merger would reduce Telenor’s stake in a combined company to below a majority.

Telenor last month stepped up its fight with Altimo by filing several lawsuits against Vimpelcom over its disputed $231m acquisition of Ukrainian Radio Systems, the small Ukrainian mobile phone operator.

Analysts said the $5bn bid was a premium of 20-30 per cent on the estimated market value of Kyivstar based on the number of its subscribers. But they said a merger would be received positively by the market, boosting the value of Vimpelcom and ending the stand-off between the two shareholders.

The Vimpelcom offer consists of $5bn in stock and would assume debts that stood at $456m at the end of 2005.

Additional reporting by Tom Warner in Ukraine.

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