Vimpel Sets Bid For Top Telecom In Ukraine

MOSCOW, Russia -- Vimpel-Communications, a Russian mobile phone company on an aggressive expansion drive in the former Soviet Union, said Monday that it had offered to buy the largest telecommunications operator in Ukraine for $5 billion in stock and the assumption of debt.

VimpelCom Chairman of the Board David J. Haines

Vimpel, which in 1997 became the first Russian company to trade on the New York Stock Exchange, is in a race for market share in former Soviet republics that has put the company's two principal shareholders in conflict over expansion plans and issues of corporate governance. They are the Russian company Altimo and the Norwegian company Telenor.

Vimpel's offer marks another move in their intricate duel of lawsuits and acquisitions being played out in several countries.

At issue are Altimo's expansion plans in Ukraine, with a population close to 50 million and one of the hottest cellphone markets in Europe. Complicating the offer, Telenor and Altimo's parent company have stakes in the Ukrainian and Russian companies.

Vimpel is 27 percent controlled by Telenor and 33 percent by Altimo, a holding company for the telecommunications assets of the Russian company Alfa.

In Ukraine, Kyivstar is 56 percent controlled by Telenor and 44 percent by Alfa. Telenor issued a statement Monday suggesting that it would not immediately accept the offer for the Ukrainian company.

"Telenor and Altimo, both being major shareholders in Vimpel and Kyivstar, have important unresolved governance issues," Telenor said in the statement, attributed to Jan Thygesen, the vice president and head of Central and Eastern Europe operations for Telenor. "Telenor is ready to work constructively with Altimo and all other shareholders but insists that proper corporate governance must be re-established and that contractual obligations must be respected."

Vimpel said in a statement that the purchase would address Telenor's concerns about its expansion plans in Ukraine through a smaller, competing operator, Ukrainian RadioSystems.

"The combination of Vimpel and Kyivstar is compelling from a strategic and financial perspective," Vimpel said in a statement issued in Moscow.

It said the offer of $5 billion reflected Kyivstar's growth potential in one of Europe's fastest expanding cellphone markets, while most of the Western European market is saturated. The Russian market is also approaching saturation, sending domestic companies looking to other nations for expansion.

Vimpel said a merger could "generate significant synergies, as well as significant operating efficiencies."

In Oslo trading Monday, Telenor's stock closed at 67.25 kronor, or $9.91, down 1.75 kronor. Vimpel, traded on the New York Stock Exchange as American Depository Receipts, was at $44.81, up 7 cents, in afternoon trading.

If Telenor accepted the offer for Kyivstar, Telenor would lose operational control of its Ukrainian asset to the Russians. In exchange, it would increase its exposure to the larger Russian market - though as a minority, foreign shareholder in a tough market where Alfa is a dominant player everywhere but Moscow.

Source: The New York Times