SOURCE: Telenor

August 16, 2008 03:38 ET

Telenor to appeal Siberian verdict in collusive lawsuit instigated by Alfa

OSLO, NORWAY--(Marketwire - August 16, 2008) - (Fornebu, Norway - August 16, 2008) A court in the Siberian city of Khanty-Mansiysk, Russia shortly after 2 am Saturday morning local time issued a verdict holding Telenor liable for USD 2,824,125,677 in damages plus RUR 460,000 in costs for allegedly having delayed VimpelCom's acquisition of Ukrainian Radio Systems, a small Ukrainian mobile operator. Telenor strongly believes the claimant Farimex is affiliated with the Alfa Group and that the case has no merit. Telenor is confident it will prevail in reversing the decision on appeal.

he lawsuit, which was filed by Farimex Products, Inc., a British Virgin Islands registered company, claims that Telenor delayed VimpelCom's USD230 million acquisition of Ukrainian mobile operator URS WellCom by nearly one year.

"Today's decision comes as no surprise to us," said Jan Edvard Thygesen, Executive Vice President and head of Telenor's Central and East European operations. "This case has absolutely no merit, and there have been numerous procedural irregularities in the court's conduct of the case. We believe Farimex is affiliated with the Alfa Group and we will pursue all possible legal remedies to vacate this decision. We are confident we will prevail on appeal. In other cases involving Alfa, Russia's higher courts have overturned spurious rulings originating in regional courts with no relationship to the parties to the case," said Thygesen.

Farimex, which is incorporated in the British Virgin Islands, lists as its sole director, Dmitry Fridman, a cousin of Alfa Group Chairman Mikhail Fridman. In a Geneva arbitration claim filed in March 2008, Alfa Group subsidiary Eco Telecom made a claim against Telenor that is nearly identical to the claim made by Farimex in Khanty-Mansiysk. Telenor filed a lawsuit in US federal court in New York in June 2008 in an effort to force Farimex to arbitrate its claim in Geneva.

Although it says it owns only 25,000 VimpelCom ADRs, representing 1,250 common shares (with a current market value of approximately USD600,000 and constituting 0.002 per cent of VimpelCom's voting shares), Farimex claimed damages, initially, of nearly USD3.8 billion, increasing the amount of its claim on August 8, 2008 to just over USD 5.7 billion. In keeping with Alfa Group's time-tested strategy of collusive lawsuits, a number of Alfa entities were also named as defendants in the case, including four which have no relationship or connection to VimpelCom. The court ruled that none of these defendants had any liability, and held that Telenor was the only entity with liability in the case. The court stated that the damages should be paid to VimpelCom. Although named as a third party in Farimex's complaint, VimpelCom has not participated in the case. One of the four defendants, OAO "CT-Mobile" has its registered office in Khanty-Mansiysk, which was the only basis for Farimex to bring the case there. Khanty-Mansiysk is a remote town in Siberia, 2,759 kilometers east of Moscow, in Russia's largest oil producing province.

About URS

Telenor opposed VimpelCom's acquisition of URS because the acquisition was vastly overpriced and made no business sense. In addition, there was no transparency concerning the identity of the sellers of URS (who, to this day, have not been identified). URS has been unprofitable ever since VimpelCom acquired it in November 2005, losing USD4.1 million in 2005, USD61 million in 2006 and USD59.6 million in 2007 and requiring regular cash injections in order to remain in business. URS is the fourth mobile operator in the Ukrainian market, with 4.8 per cent national market share in 2007, declining to 3.8 per cent as of June 30, 2008.

Telenor owns 33.6 per cent of VimpelCom's shares of common stock and 29.9 per cent of VimpelCom's voting capital stock.

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Contact Information

  • Further information:

    Dag Melgaard, Vice President Group Communications, Telenor ASA
    tel: +47 901 92 000
    e-mail: Email Contact