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Telenor says no peace with Alfa until suit dropped

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OSLO/MOSCOW, June 10 (Reuters) - Norwegian telecom Telenor said any deal with Alfa Group to resolve a dispute over jointly-owned mobile ventures in Russia and Ukraine must wait until a contentious court case against it has been dropped. 
The two owners of Russia's second biggest mobile operator, Vimpelcom, are at a standoff over its future after Telenor was taken to court by a Vimpelcom shareholder, Farimex, and fined $1.7 billion over its Ukrainian business strategy.
On Wednesday, a Siberian court delayed until Sept. 30 the Norwegian phone company's appeal of the fine for holding back Vimpelcom's entry into Ukraine, which Fairmex said resulted in losses for Vimpelcom.
"A solution to this conflict will not be finalised by anyone until the Farimex case has been dismissed," Telenor spokesman Dag Melgaard said on Wednesday. He declined to say if Telenor was indeed in talks with Alfa Group.
The court decision to delay an appeal hearing could leave room for talks to reopen, suggested one analyst.
"They did not rule in Telenor's favour but Telenor did not lose, either," UniCredit telecoms analyst Nadya Golubeva. "So it might be taken as if they still hope there could be negotiations."
The Norwegian carrier's prized 29.9 percent Vimpelcom stake has been frozen and could be sold off to pay the fine at any time. Russian baillifs said on Tuesday that pending or planned Telenor appeals posed no obstacle to a sale of its Vimpelcom stake.
Many analysts view the Fairmex lawsuit and the sale threat as rough negotiating tactics as Telenor and Alfa hammer out a deal to split up Vimpelcom and their Ukrainian operator, Kyivstar, though Alfa has proposed a full merger of the two.
Although Alfa has denied any connection to Farimex, which is registered in the British Virgin Islands and holds only a tiny stake in Vimpelcom, Telenor believes it is linked with Alfa, which has a long history of litigation against the Norwegian company over strategy at both Vimpelcom and Kyivstar.

PRESSURE ON TELENOR

Vimpelcom has underperformed Russia's benchmark RTS index by 43 percent this year under threat that Telenor's stake could be sold in a fire sale. Telenor shares have been hit by fears it could lose one of its most valuable foreign assets.
A lawyer for Telenor in the case said Wednesday's Siberian court delay reflected reluctance to see the case go to appeal in a higher court in Moscow.
"One of the reasons for delaying is to avoid letting Telenor appeal in the Supreme Arbitration Court, which is known as an independent court and does not take decisions in the interests of private citizens but on the basis of the law," Grigory Chernyshyov told a conference call.
However, he said the process could easily be halted if a deal was struck. "Theoretically it is enough if Farimex and Vimpelcom withdraw their claim to the fine," Chernyshev said. "No other court rulings are required."
Vimpelcom is to receive the $1.7 billion fine since, according to the Farimex claim, its interests were damaged by Telenor's actions. Vimpelcom has said it is not involved and is only observing the court process from afar.
However, the two sides still appear far apart on a deal.
"Alfa is clearly looking for some agreement," Golubeva said. "It was trying to persuade (Telenor) to merge Kyivstar with Vimpelcom. I think it is very likely they are clearly trying to force Kyivstar into something."
Telenor is seen as unlikely to agree give up control of Kyivstar for a stake in merged operator it would never control in a continued marriage with Alfa.
"Nobody benefits from today's situation," said Tone Toenseth, an analyst at Argo Securities in Oslo. "The question is really about the terms that Telenor has to give in on... (for) either a merger or a separation."

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