Telenor said it had expressed its position to the head of the Federal Anti-Monopoly Service that the approval of an application filed by Altimo, the telecommunications arm of financial-industrial conglomerate Alfa Group, to up its stake in VimpelCom would constitute a breach of Russian anti-monopoly law.
VimpelCom (RTS ticker: VIMPG) is best known for the Beeline trademark, one of Russia's most popular mobile operators. Telenor holds a 26.6% stake in VimpelCom, whereas Altimo (previously named Alfa Telecom), holds a 32.9% stake.
Earlier, Altimo asked the Federal Anti-Monopoly Service to allow it increase its stake in VimpelCom to 60% plus one voting share, whereas Telenor approached the service with a request to raise its shareholding in the cell operator to 45%.
Telenor said that if Altimo's application were granted, the company would control 52% of the cell market in Russia, more than 54% in Moscow and more than 59% in St. Petersburg, with similar effects to be felt in other Russian regions. Moreover, in addition to the controlling stake that Altimo might obtain in VimpelCom, the company currently holds a blocking share in MegaFon, Russia's third cell phone operator.
According to Telenor, this dominance on the market will restrict competition, push up prices and bring down the quality of cell phone services.
VimpelCom (RTS ticker: VIMPG), Russia's second largest mobile phone operator, is majority owned by Telenor and Altimo. The conflict between Telenor and Alfa Group first erupted over VimpelCom's plans to enter the Ukrainian cell phone market.
The dispute began when Alfa Group supported a VimpelCom deal to acquire Ukrainian Radio Systems, a leading cell phone operator in Ukraine. However, Telenor was against the deal, saying it was overpriced.
The deal was struck in the fall of 2005 and in January 2006 Telenor filed three lawsuits with a Moscow arbitration court against VimpelCom to challenge the deal.
Recently VimpelCom sent an offer to Telenor and Altimo, to buy a 100% stake in Kyivstar GSM, another Ukrainian mobile operator, to end the dispute. Telenor and Alfa Group are the core shareholders of Kyivstar. If the deal is approved, VimpelCom intends to merge two Ukrainian operators into one business.
