Vimpelcom parity of ownership is crux of current negotiations

05.10.2012

PaRR (Policy and Regulatory Report) - A part of the Financial Times Group

The principle of parity of ownership and not having one main shareholder possessing more operational control than another remains the key to resolving the ongoing dispute between Russia’s Federal Antimonopoly Service (FAS) and international telecommunications group Vimpelcom (VIP:US), according to spokespeople for Vimpelcom and companies in its shareholding, as well as sector lawyers.

Vimpelcom, which is listed on the New York Stock Exchange (NYSE), but which has its headquarters in the Netherlands and main shareholders from Russia and Norway, announced on 1 October that it “has decided to delay the registration of the requested transfer of 71,000,000 convertible preferred shares from Weather Investments to Telenor East Holding II, until the order issued by the Moscow Arbitration Court prohibiting such transfer ceases to have effect”.

The preferred shares were originally owned by Weather Investments, a former Italian shareholder, and represent about 3.5% of Vimpelcom stock, noted a Vimpelcom spokesperson. These shares are of significance, however, as they would take Telenor’s ownership in Vimpelcom over the 40% mark, the same spokesperson noted.

The order from the Moscow Arbitration Court dates back to April 2012 and relates to a claim made by FAS in regard to Telenor’s allegedly dominant position in Vimpelcom. “The background is still the same, the Federal Antimonopoly Service (FAS) tries to keep the balance between foreign and Russian shareholders in Vimpelcom,” said Andrey Neminuschiy, an associate in the antitrust practice of Goltsblat BLP, the Russian practice of London-based law firm Berwin Leighton Paisner (BLP).

“The situation which existed before the implementation of the (3.5%) option was very favourable to the conclusion of an amicable agreement between FAS, Weather and Telenor, since, in FAS’ opinion at that time, Altimo [the main Russian shareholder in Vimpelcom] had acquired control over Vimpelcom.

"Therefore, [FAS head Mr Igor] Artimiev asked Vimpelcom not to register the transfer of 3.5% of preferred shares to Telenor in order to keep the balance mentioned,” Neminuschiy said.

The Vimpelcom spokesperson confirmed that the key to the issue was that the FAS was “seeking parity between Russian and Norwegian investors”.

A spokesperson for Telenor noted that Artemiev had made comments to the Russian and international media yesterday (3 October) indicating that the regulator was well disposed towards a proposal made by Vimpelcom earlier this week. Under Vimpelcom's suggestion, Altimo would buy and split a 6% stake in Vimpelcom owned by an investment vehicle of Ukrainian entrepreneur Viktor Pinchuk. This would give equal voting power to the two sides. When the 3.5% stake is taken into consideration, Telenor currently holds 43% in Vimpelcom, as opposed to the 40.5% owned by Altimo.

Dmitry Chernyy, a partner at Muranov, Chernyakov & Partners in Moscow, noted that a possible timeframe for the situation to be resolved within the courts lies within a broad range of dates. Chernyy proposed 17 October 2012, if all parties come to the court and agree that the case can be heard on the merits immediately, through March 2013 if the court decides that Altimo is not duly notified. Chernyy also noted that, “you should understand that most possibly active negotiations are now taking place behind the closed doors, so the outcome and the timeframe of the case depends on the results of negotiations more than on the applicable court procedure."

by Oliver Adelman and Natalia Lapotko in London

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