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INTERVIEW-UPDATE 1-Telenor "eager" to solve Russian problems

Published 07/23/2009, 08:10 AM
Updated 07/23/2009, 08:16 AM
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* CEO says Farimex case must be solved for any Alfa deal

* Says split or tie-up between Ukraine-Russia units possible

* Sees "big concerns" over Farimex case by other investors

* Says meeting Alfa officials on regular basis

(Adds quotes, details)

By Wojciech Moskwa and Joachim Dagenborg

OSLO, July 23 (Reuters) - Norway's Telenor is "eager" to resolve problems with disgruntled Russian partner Alfa Group and is open to a number of potential solutions for their uneasy mobile ventures in Russia and Ukraine, its CEO said on Thursday.

But Telenor Chief Executive Jan Fredrik Baksaas told Reuters that before any deal with Alfa can be reached, a contentious court case brought against it in Siberia must be dropped.

"There are plenty of resolution mechanisms that we can approach... there are combinations, splits, etcetera and we have not commented on what the most likely solution might be," Baksaas said in an interview.

"We have always been very eager at trying to solve this."

Analysts say the most likely resolution would be "corporate divorce" giving Telenor Alfa's 43 percent stake in Ukrainian mobile leader Kyivstar, and Alfa gaining Telenor's 30 percent voting share in No. 2 Russian operator Vimpelcom.

Telenor faces the prospect of losing its Vimpelcom stake after the Siberian court ruled it must pay Vimpelcom $1.7 billion for allegedly delaying its entry into Ukraine.

Telenor is appealing the case, brought forward by Farimex a small shareholder in Vimpelcom, but the Russian court may sell off Telenor's stake in Vimpelcom before a final decision.

Telenor believes Farimex is linked to Alfa -- the other main Vimpelcom owner holding 44 percent of votes. Alfa, run by Russian billionaire Mikhail Fridman, denies any connection.

"This (case) is a big concern to us and also to a number of other foreign investors in Russia or those thinking about entering -- protection under the law is so important," he said.

"The arrest of (Telenor's Vimpelcom) shares is uncomfortable and the threat of these shares being sold in a forced sale is even worse, and that is happening in the midst of a legal process that has not been exhausted," Baksaas said.

He said Telenor was seeking to raise awareness of its legal woes among the international business community. Norway's Prime Minister also visited Moscow to prevent the asset sale, but was told the case was a dispute between private firms.

Asked if there were talks with Alfa to resolve the dispute, Baksaas said: "We're meeting Alfa parties regularly, both in Kyivstar and Vimpelcom, so there are occasions for us to talk."

"I cannot give any flavour of our interactions with Alfa, but we are constructive in ... finding a solution, and of course the Farimex case is of big concern to us and of course needs to be resolved before the next step can be taken," he said.

In announcing its second quarter results on Thursday, Telenor said it did not make any provisions for the Farimex case because "more likely than not" it would not have a material adverse effect. (Editing by Elaine Hardcastle)

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