Alfa Wins Ukraine Ban on Kyivstar Managers

KIEV, Ukraine -- A Ukrainian court has suspended the top management of Ukraine's number two mobile phone company, Kyivstar, following a suit by Russia's Alfa Group, the smaller of its two shareholders, Kyivstar said on Friday.

It said it was preparing a legal challenge.

Alfa Group President Mikhail Fridman

A source close to Alfa said: "The management has been temporarily barred from managing the company as security for the claim."

"They can perform day-to-day tasks, but their decision-making authority is limited," the source said.

Alfa filed the lawsuit this week, and the ruling appeared to mark a victory in its escalating dispute with Norway's Telenor , the majority owner of Kyivstar, over strategy in Ukraine.

The Kiev district court barred Kyivstar Chief Executive Igor Lytovchenko and other top executives from doing their jobs while it reviews the merits of the Alfa case, Russian newspapers reported.

Kyivstar hit back, saying the court had exceeded its competence by interfering in its operations and that junior executives would maintain services for its 10 million customers.

"As these documents are legally without foundation, they can have no negative impact on the activities of Kyivstar, which will continue to operate in normal working fashion," Kyivstar spokesman Viktor Gotsulenko said in a statement.

"We will issue a challenge to these documents in the near future through legal channels. We are now preparing the legal basis for this."

Alfa said in its lawsuit that it had been discriminated against as a shareholder and that Kyivstar's founding documents did not comply with Ukrainian law.

Dag Melgaard, spokesman for Telenor, which owns 57 percent of Kyivstar, said his company was surprised by Alfa's actions.

"We thought they had abandoned such methods since they tried last in Russia," he said, referring to Alfa's aggressive way of doing business.

"We are also confident that these injunctions are without foundation and that when the Ukrainian court hears both our versions of the matter and Kyivstar's these injunctions will be lifted because they are out of proportion and without foundation."


Alfa and Telenor are also partners in Russia's second-largest mobile phone company, Vimpelcom , but have fallen out over Alfa's push for Vimpelcom to take over a small Ukrainian operator.

Alfa has failed so far to muster enough support for the $200 million purchase of Ukrainian RadioSystems to go through, but has called a shareholders' meeting in mid-September and hopes to win majority backing.

"Alfa's move is simply a tactical one in a much bigger game," Moscow investment bank UFG said in a research note.

UFG speculated that Alfa wanted Vimpelcom and Kyivstar to merge, which would put a marketable value on Alfa's exposure to Ukraine, a market it sees as more promising than Russia due to its lower mobile penetration.

But a Vimpelcom-Kyivstar merger would leave Telenor with a minority stake in a merged entity, an outcome the Norwegians would not want.

"The ongoing conflict is most likely being driven by the two parties having difficulty in agreeing the price," UFG said.

Source: Reuters